S&P may downgrade India’s rating

Global rating agency Standard & Poor's said it may downgrade India's sovereign rating.

Global rating agency Standard & Poor’s said it may downgrade India’s sovereign rating,if external liquidity condition weakens further and fiscal deficit worsens,which may dampen investors’ confidence in Indian economy.

“Any further fiscal slippage,or a marked decline in external liquidity indicators,or policy measures that weaken economic growth prospects could lead to a downgrade of the ratings,” S&P said in a report.

Currently,the agency assigns ‘BBB-‘ to India,which is the lowest rung of investment grade.

Story continues below this ad

The rating agency expects large fiscal deficits of 11.1 per cent of GDP this fiscal year,including oil and fertilizer bonds,which are not counted in fiscal deficit as of now.

In this context,the full budget for fiscal 2009-2010,which is expected to be announced by the end of July,will be a good indicator of the Government’s near-term economic and fiscal policies,it added.

Last review of the rating was done on February 24. The rating agency downgraded the outlook to negative from stable.

This was due to deteriorating fiscal outlook resulting from Governments stimulus measures and structural problems.