Standard & Poor's Ratings Services on Friday said Finance Minister P Chidambaram's Budget indicates the country's desire for fiscal prudence.

"This Budget marks the new government's attempt at balancing demands from its coalition and presenting itself as fiscally responsible," S&P senior executives Ping Chew and Paul Coughlin said in Singapore.

India's foreign currency rating by S&P is now BB/Stable/B and local currency BB+/Negative/B. It was widely expected that the global rating agency would upgrade India after the general elections.

"A concerted effort between the different levels of government to control the fiscal deficit and stabilise the growth of the government's debt burden could result in a stable outlook for the local currency rating," S&P said.

A better fiscal performance, along with structural reform to maintain the country's growth prospects and its strong external profile could lead to an improved foreign currency rating, it added.

The Budget has targeted a fiscal deficit of 4.4 per cent of GDP, down from 4.6 per cent in 2003-2004. This is based on 7 per cent GDP growth and 18 per cent operating revenue growth, and the expectation of limiting total expenditure growth to 8 per cent.

The government faces spending pressure partly due to its emphasis on public investment, infrastructure, and the rural and social sectors.

"Achieving the target, however, will depend on revenue growth, which looks promising thanks to strong industrial growth contributing to tax intake, several tax measures and tighter tax administration," S&P said.

Chidambaram announced plans to liberalise the agriculture sector, reservation policy for small-scale industry, and foreign investment environment in selected sectors, which could boost growth and investment prospects.

Standard & Poor's sovereign ratings on India are constrained by the high public debt burden and fiscal inflexibility.

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