India's ratings are constrained by high public debt and serious fiscal inflexibility. The consolidated debt of the central and state governments is expected to hover around 80% of GDP this year, and interest payments alone are likely to consume nearly half of central government revenue. The ratings are supported at their current level by India's ample external liquidity. Record high foreign exchange reserves now easily exceed six times the level of short-term external debt owed by the public and private sectors. The recent passage of legislation to strengthen the stock market regulator and to bolster competition by amending archaic anti-monopoly laws augurs well for long-term growth prospects, as does the government's renewed commitment to privatization. Similarly, the passage of the
