S&P pegs CY10 inflation at 6%, sees GDP at 8% in FY11

Excerpts from Closing Bell on CNBC-TV18 Watch the full show » RELATED NEWS S&P revises India outlook from negative to stable Nifty BSE | NSE 30/05/12 Are Mutual Funds betting on Nifty?

Q: What would it take for S&P to up the rating itself on India considering that on fiscal deficit terms, India ranks better than many countries at this point in time?

A: It depends on how you view it and also and that is below the guidelines stated by the 13th Finance Commission recommendation. And then if the government is able to adhere to the medium term fiscal consolidation, which is definitely a plus for the ratings, and in order to do so, there are certain things which are crucial for the fiscal consolidation.

For example the deductions and the more efficient use of the subsidies, for food, oil and fertilisers, some of the programs have already started but others are not. Those are important because if those implementations that were done, then India's fiscal position could be relatively remote from the market volatility in the global commodities.

Q: You said you would be concerned about inflation, the calculation of most economists is that after touching perhaps 10% plus for the month of March, inflation tapers down for a couple of reasons one because of the winter food harvest is also in the market and also because there is a large base effect, what are your own expectations in terms of what you would like the RBI to do to reign in inflation?

A: There is a possibility of a slowdown in inflationary pressure being late rather than early. If you look at the cyclical issues, there will be better harvest and there will be better environment for the inflationary pressure to reduce.

But there is always a risk that there is such kind of better progress. What we like to see is a good balance - not in the expectations of future growth - but we need to certain action by the RBI to control the inflationary expectations. So I think it is up to the RBI how they are going to do it and then we would simply monitor and evaluate how the implication on the inflation and the future growth rate of the country.

Q: As of now what are S&P's forecast of an average inflation for India in 2010 and GDP growth forecast?

A: The average inflation could be at about 6%.

Q: For CY10?

A: Yes. Then the GDP forecast on the fiscal year basis, is 8%, which is our own expectation at this stage.