Indian Stock Market News, Equity Market and Sensex Today in India | Equitymaster

Helping You Build Wealth With Honest Research
Since 1996. Try Now

  • MyStocks


Login Failure
(Please do not use this option on a public machine)
  Sign Up | Forgot Password?  

Is a junk rating inevitable for India?
Thu, 2 Aug Pre-Open

In a wake-up call to the government to put its act together on the macroeconomic front, global rating agency Standard & Poor's (S&P) has scaled down India's credit rating outlook from 'stable' (BBB+) to 'negative' (BBB-) with a warning of a downgrade (to junk rating) if there is no improvement in the fiscal situation and political climate.

However with just three months into the fiscal and the Centre's finances has already begun to show slippages with high levels of deficit. The fiscal deficit, which is the difference between the government receipts and spending, touched Rs 1.9 trillion for three months ended June 2012 (1QFY13). This is 37.1% of the target of Rs 5.1 trillion set in the budget in March 2012. This means, in three months, the government has already spent one-third the money it planned for the full year. In seems that the government has not learned anything from the rating agency's warning and could miss its fiscal target for FY13 also.

In fact, the deficit was high in the first quarter despite taxes fetching reasonable revenues and plan expenditure not rising much. The main reason for high deficit was the decline in non-debt capital receipts. This is because the government's disinvestment programme has so far not raised any revenues of the Rs 300 bn pegged so far. Non plan expenditure also increased substantially and accounted for 23.2% of budget estimates for 2012-13, against 21.2% in the corresponding period of last year.

The government can bring down the fiscal deficit only by cutting expenditure. Many of the revenue expenditures like interest payments, defence, etc., and some capital expenditures like loan repayment are committed and cannot be reduced. The only expenditures that can be brought under the axe are subsidies and investment.

A cut in subsidies, though desirable, is politically difficult and it seems that the government is not willing to bite the bullet on fuel subsidies. On the contrary, subsidies are bound to increase with the introduction of the Food Security Bill which is already pending in Parliament and the drought like conditions prevailing in the country.

So unless urgent reforms are undertaken by the government, the fiscal situation is not likely to improve any time soon. In fact with economic growth slowing down, revenues to the government might also take a hit, thus adding to the fiscal woes. It is time for the government to end policy paralyses and take some tough decisions.

For information on how to pick stocks that have the potential to deliver big returns, download our special report now!

Read the latest Market Commentary

What else is happening in the markets today? Dig in...

Equitymaster requests your view! Post a comment on "Is a junk rating inevitable for India?". Click here!


Stock Market Updates

Sensex Trades Marginally Lower, Dow Futures Up by 174 Points (Today's Market)

May 14, 2021 12:30 pm

BSE Sensex is trading down by 29 points, while the NSE Nifty is trading down by 39 points.

Sensex Opens Flat; Asian Paints Rallies 7% Post Q4 Results (Today's Market)

May 14, 2021 09:30 am

Indian share markets open flat. The BSE Sensex opened down by 33 points, while the Nifty is trading lower by 14 points.

ADANI TOTAL GAS Share Price Down by 5%; BSE 500 Index Down 0.1% (Today's Market)

May 14, 2021 09:34 AM

ADANI TOTAL GAS share price is trading down by 5% and its current market price is Rs 1,330. The BSE 500 is down by 0.1%. The top gainers in the BSE 500 Index are ASIAN PAINTS (up 6.7%) and BANK OF INDIA (up 5.7%). The top losers are ADANI TOTAL GAS (down 5.2%) and VINATI ORGANICS (down 7.1%).

JINDAL STEEL & POWER Share Price Down by 5%; BSE METAL Index Down 2.4% (Today's Market)

May 14, 2021 09:32 AM

JINDAL STEEL & POWER share price is trading down by 5% and its current market price is Rs 466. The BSE METAL is down by 2.4%. The top losers are JINDAL STEEL & POWER (down 5.3%) and NMDC (down 5.3%).

BANK OF INDIA Share Price Up by 5%; BSE BANKEX Index Up 0.3% (Today's Market)

May 14, 2021 09:28 AM

BANK OF INDIA share price is trading up by 5% and its current market price is Rs 77. The BSE BANKEX is up by 0.3%. The top gainers in the BSE BANKEX Index is BANK OF INDIA (up 5.2%). The top losers is HDFC BANK (down 0.2%).

GRINDWELL NORTON Share Price Up by 8%; BSE CAPITAL GOODS Index Up 0.4% (Today's Market)

May 14, 2021 09:26 AM

GRINDWELL NORTON share price is trading up by 8% and its current market price is Rs 1,259. The BSE CAPITAL GOODS is up by 0.4%. The top gainers in the BSE CAPITAL GOODS Index is GRINDWELL NORTON (up 7.7%). The top losers are L&T (down 0.3%) and V GUARD INDUSTRIES (down 0.4%).

View More Indian Share Market News

Most Popular

My Secret to Find Breakthrough Stocks(Fast Profits Daily)

May 7, 2021

I've used this trading technique for many years with great success. I'm sharing it with you today.

Are the Stock Markets Deaf to Covid Agony?(Profit Hunter)

May 6, 2021

Why are markets discounting the economic impact of Covid?

The Worst Sector in the Market(Fast Profits Daily)

May 11, 2021

The worst sector in the stock market according to the charts.

The Key to Profit from India's EV Revolution(Profit Hunter)

May 7, 2021

Stocks you must consider investing in before buying your first electric vehicle.


India's #1 Trader
Reveals His Secrets

Secret To Increasing Your Trading Profits Today
Get this Special Report,
The Secret to Increasing Your Trading Profits Today, Now!
We will never sell or rent your email id.
Please read our Terms


May 14, 2021 (Close)