S&P downgrades India’s outlook to negative

S&P downgrades India’s outlook to negativeGlobal credit rating agency, Standard & Poor (S&P) has said that it is revising outlook for India to ‘negative’ amid macro economic developments and inability of the government to implement reforms at a fast pace.

The agency also said that it might have to downgrade in two years if the situation does not improve in two years and political environment continue to become worse in the country. It says that there is very little progress in economic reforms and GDP growth might fall to the level of 5.3 per cent in 2012-13. The government expects GDP growth to be in the range of 7 per cent.

Standard & Poor's credit analyst Takahira Ogawa said, “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.”

Following the downgrade by the agency, the domestic stock exchanges fell 200 points to 17,019 while the broader Nifty index has fallen 60 points to 5,160. The lower rating could make it harder for Indian businesses to borrow, especially in foreign currency.

The downgrade will also have an impact on the treasury bonds and rupee movement as they are linked to government finances.