As per latest reports from Fitch Ratings, India’s sovereign are dependent on the new government’s fiscal policy.

In order to fight the economic slowdown, the new government is supposed to balance between the short-term stimulus measures, while the medium-term need to balance government finances.

James McCormack, Head of Asia Sovereigns at Fitch told, “While current economic conditions are prompting many governments to undertake counter-cyclical stimulus measures, the recent deterioration in India's fiscal position accentuates underlying structural weaknesses in public finances that, if unaddressed, could undermine sovereign creditworthiness.”

On May 16, the announcement of the results of the India’s elections would be made. A hung parliament has been indicated by exit polls and analysts are predicting that this might result in populist policies being announced by the new government.

Another fiscal stimulus might also be announced by new government, Fitch is expecting. This might push the FY'10 fiscal deficit to 10% of the GDP for the second consecutive year.

For FY’08, fiscal deficit was 6.1% of GDP and hiked to 10.6% in FY’09. Congress led UPA government has already announced measures on three different occasions to enhance the declining economy over the last nine months.

Following many years of stable performance, India's economy has also been slowing.

“While the last five years has seen India's growth average 9% but growth in FY'10, it is expected to fall to 5% on stagnating exports, falling capital inflows leading to a slowing economy,” said an analyst.