Standard and Poor's cuts India's outlook from stable to negative | WPN World People News

Global ratings agency Standard Poor's Wednesday lowered its outlook on India to negative from stable, warning of a downgrade because of worsening fiscal deficit and diminishing growth prospects in a "weakened political setting".

"We are revising the outlook on the long-term ratings on India to negative," credit analyst Takahira Ogawa of the US agency said, warning there was one-in-three likelihood of India's sovereign ratings downgrade.

"The outlook revision reflects our view of at least a one-in-three likelihood of a downgrade if the external position continues to deteriorate, growth prospects diminish, or progress on fiscal reforms remains slow in a weakened political setting," Ogawa said.

The ratings agency kept India's long-term rating unchanged at the lowest investment grade rating of BBB minus.

Ogawa said India's economic growth in 2012-13 would be 5.3 per cent, which is far lower than the government's projection of 7.6 per cent.

Finance Minister Pranab Mukherjee said there was no cause for panic even as the government is concerned over the lowering of outlook.

"I am concerned, but I don't feel panicky because I am confident that our economy will grow by around seven per cent, if not plus. We will be able to control fiscal deficit and it will be around 5.1 per cent," Mukherjee told reporters.

Mukherjee admitted there have been delays on economic reforms but the government was taking steps to push up the reforms process.

Ogawa said India's fiscal deficit was likely to widen to around 8 per cent in the current financial year as against the government's budgetary target of 5.1 per cent.

On the other hand, the ratings could stabilise again if the government implements initiatives to reduce structural fiscal deficits and to improve its investment climate, Standard Poor's said in a statement.

"Fiscal measures could include an increase in domestic prices and a more efficient use of fuel and fertiliser subsidies, or an early implementation of the goods and service tax."

Source: The Asia News.Net