New Delhi: Standard & Poor’s on Wednesday cut India’s credit outlook rating to negative in a surprise move that could see Asia’s third biggest economy lose its investment-grade status if the government fails to solve deep-seated problems that have clouded its economic prospects and spooked investors.
The agency maintained India’s rating at BBB-, but warned it faces at least a one-in-three chance of losing its status if its financial situation worsens.
The “BBB-” is one notch above “junk,” which carries an increased risk of default and would see India having to pay higher interest rates on its public borrowing.
S&P credit analyst Takahira Ogawa said there was a one-in-three chance of a downgrade in the next 24 months “if external position continues to deteriorate, growth prospects diminish, or progress on fiscal reforms remains slow in a weakened political setting.”
“We are revising the outlook on the long-term ratings on India to negative.”
Asia’s third-largest economy is battling stubborn inflation, the widest budget deficit of all major emerging economies, a weak fiscal position and slower growth on the domestic front.
Uncertainty in global markets and Europe’s long-running sovereign debt crisis has added to the pressures.
India’s economy is forecast to expand around 7.6 percent this fiscal year, from the 6.9 percent estimated for last year, the second slowest pace in a decade.
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