S&P reaffirms negative rating outlook for Indian economy

S&P Indian DowngradeNot convinced with the Indian government’s measures to reform the economy, Standard & Poor's (S&P) has reiterated its negative outlook on the country’s sovereign credit rating, which is one notch above "junk" status.

The global rating agency maintained India’s credit rating at BBB- for long term and A-3 for short term. Credit rating, which is still negative, is the biggest concern of the Congress-led UPA government, which had recently been pitching for an upgrade.

S&P acknowledged that India's economic situation had improved over the past year, but underlined that high fiscal deficit and huge government borrowings remained the main drag on the country’s rating.

The rating agency also warned that there were still some chances for a downgrade in the country’s credit rating.

Speaking on the topic, S&P credit analyst Takahira Ogawa said, “There is some easing of the pressure towards the downgrade of the rating. But nonetheless there is still more than one-third of chance for downgrade unless we see significant improvement.”

S&P issued the warning at a time when Union Finance Minister P. Chidambaram is in Paris to encourage investors to invest in India.

India’s gross domestic product (GDP) grew at an annual rate of just 5 per cent in the financial year that ended on March 31; the country’s worst GDP growth in a decade.