Left withdrawal can complicate fiscal-discipline steps: S

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New Delhi, Jul 11 (UNI) Faced with rising fiscal deficits and inflation, situation of the Congress-led UPA government could complicate early implementation of fiscal-discipline measures with the withdrawal of support by the Left at a time when India's credit profile has worsened in the past twelve months, an international rating agency said today.

Describing its current rating as ''balanced'' (BBB), Standard&Poor's said this, however, assumed that the reasons for credit deterioration are temporary.

''If we conclude that they are longer lasting, India's credit ratings could be lowered again to speculative grade,'' agency credit analyst Takahira Ogawa said.

''These risks, however, are still mitigated by India's deep domestic markets, which allow it to finance large fiscal deficits without recourse to external funds, and by its strong external liquidity,'' said Mr Ogawa.

The coming weeks and months will be critical as national elections approach. Political compulsions might make it difficult for the government to take timely measures to staunch fiscal or monetary slippages, the analysis by S&P's said.

Failure to respond adequately to negative developments could point to a sustained deterioration in macroeconomic stability and thus increase the probability that the government's ratings could be lowered to speculative grade, he said.

UNI SAA SBA DS1238

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