DCR downgrades India

MUMBAI, Aug 10: Duff amp; Phelps Credit Rating Company DCR of the US, a global rating agency, on Monday downgraded India's foreign cur...

MUMBAI, Aug 10: Duff amp; Phelps Credit Rating Company DCR of the US, a global rating agency, on Monday downgraded India8217;s foreign currency and local currency ratings following 8220;significant fiscal slippages and the potential for balance of payment deterioration in the coming years8221;. While DCR has downgraded the foreign currency rating to BB8217; from BBB-8216;, the local currency rating has been lowered to BBB8217; from BBB8217;. The outlook on the ratings is stable.

The rating action follows DCR8217;s recent due diligence meetings in India. DCR is the third global rating agency after Moody8217;s and Standard amp; Poor8217;s to downgrade India this year. Standard amp; Poor8217;s is expected to make an announcement next week on its outlook on India8217;s sovereign rating.

Soon after DCR downgraded India, the rupee weakend further by six paise against the US dollar at the inter-bank foreign exchange market. The rupee opened lower at 42.63/66, touched a low of 42.69/71 on hectic dollar buying from corporates and banks and closed at 42.66/67against the previous close of 42.60/63.

However, bankers and domestic credit rating agencies said the downgrading brings DCR8217;s rating of India on par with the country8217;s below investment grade rating by larger international rating agencies like Standard amp; Poor8217;s and Moody8217;s. 8220;It will not affect us in any way,8221; said Bank of India executive director S Gopalakrishnan. The spread on Indian papers had moved up after Moody8217;s downgrade in July and is not expected to move up still further. Now all the three agency8217;s ratings are on par.

While downgrading India, DCR has said that it remains concerned about the pace of economic reforms under India8217;s coalition governments. 8220;Previous coalition governments have been restrained in making bold and much-needed economic reforms. Differing priorities within the present coalition could constrain the government8217;s ability to undertake critical reforms in the areas of fiscal consolidation, privatisation and infrastructure, it said.