Fitch: Indian states resilient

Fitch Ratings said that on the basis of present economic growth trends and the fiscal situations of Indian states, the impact of a proposed national salary revision will not be as severe as it was at the time of the last revision.

In 1997, the fiscal situation was grimmer for Indian states when increased expenditure on wages and salaries resulted in increased borrowing, engulfing some states in a fiscal crisis and trapping them in a vicious cycle of debt, Fitch said.

Now there is a marked difference in present growth and the states' fiscal situations, the agency said.

The agency said it believes the Indian states have enough resilience to absorb the impact of the proposed salary revision, although it also believes that the financial flexibility of the fiscally weaker states could be negatively affected, leaving them vulnerable and exposed to pressure on their budgets.

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