S&P warns of India’s ratings downgrade post-2014 election

    By IANS,

    New Delhi : Global ratings agency Standard & Poor’s (S&P) Thursday maintained “negative” outlook on India’s sovereign ratings and warned of a likely downgrade if policy drift continued after the 2014 general election.

    The agency affirmed the ‘BBB-‘ long-term and ‘A-3’ short-term unsolicited sovereign credit ratings on India. The outlook on the long-term rating remains negative.

    These are the lowest investment grade ratings. Any downgrade would reduce India’s sovereign ratings to junk status making foreign borrowings costlier.

    “The negative outlook indicates that we may lower the rating to speculative grade next year if the government that takes office after the general election does not appear capable of reversing India’s low economic growth,” the agency said.

    S&P said its ratings action would depend on the policy agenda of the new government that would come after the general election scheduled in first half of 2014.

    “If we believe that the agenda can restore some of India’s lost growth potential, consolidate its fiscal accounts, and permit the conduct of an effective monetary policy, we may revise the outlook to stable. If, however, we see continued policy drift, we may lower the rating within a year,” it said.