mangalore today
name
name
name
Tuesday, December 24
namenamename

 

S&P cuts India outlook to negative; markets hit


Mangalore Today/ DHNS

Standard and PoorsMumbai, Apr 25, 2012: Ratings agency Standard & Poor’s on Wednesday cut India’s outlook to negative from stable, citing its large fiscal deficit and expectations of only modest progress on reforms given political constraints, battering stocks, bonds and the rupee.

The lowered outlook jeopardises India’s long-term rating of BBB-, which is the lowest investment grade rating.

"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," S&P credit analyst Takahira Ogawa said in a note.

India’s 10-year bond yield rose 4 basis points to 8.63 percent, while the rupee weakened to 52.64 against the dollar from 52.48 before the action.

Stocks were also hit, with the main BSE index down 0.9 percent.

India’s fiscal deficit swelled to an expected 5.9 percent of GDP in the fiscal year that ended in March, far above the government’s 4.6 percent target.

Many economists believe New Delhi will have a tough time hitting its target of cutting the deficit in the current fiscal year to 5.1 percent of GDP, given a hefty subsidy burden and a weakened government that has failed to push through significant reforms.

The general elections looming in 2014 are expected to limit the prospects for significant reforms that would improve the investment climate and India’s fiscal position.

"The writing was on the wall given the country’s weakening debt profile and sluggish investment climate," said Radhika Rao, economist at Forecast Pte in Singapore.

"With the coveted investment grade now at risk, one can only hope this acts as a wake-up call for the government," she said.

Moody’s has a Baa3 rating on India, while Fitch rates India BBB-. Both are also the minimum investment grade ratings. Moody’s in December issued a stable outlook for India.


Write Comment | E-Mail To a Friend | Facebook | Twitter | Print
Comments on this Article
Robert George, Dubai Fri, April-27-2012, 7:57
Standard Poor’s has sent an early shot across India’s bow by downgrading its credit rating. Ironically, Moody’s had patted the country on the back as recently as last December. Undoubtedly, India needs to get its act together and improve its financial status. But what is disturbing is rating agencies’ hubris and often suspicious ways in which a nation’s performance is rated. Besides, rivalry between ratings agencies is frequently brought to the fore by their dissimilar ratings. It’s time such ambiguous ratings are disregarded in favour of disinterested observations.
A. S. Mathew, U.S.A. Wed, April-25-2012, 8:18
Based on the current news through many business journals, both China and India are faced with economic slow down. Some people predicted that the oil price in the U.S. may hit $ 5.00/gallon, but it is now coming down from the $ 4.00 mark due to the less demand in China, the 2nd biggest consumer in the world. Also, the consumption in the U.S. has reduced to 6% less than 2011. All these are clear indications of a very slow economic recovery (if it has started) in the U.S. and other western countries, which will create some direct and indirect economic consequences both in China and India.
Error:NULL
Write your Comments on this Article
Your Name
Native Place / Place of Residence
Your E-mail
Your Comment
You have characters left.
Security Validation
Enter the characters in the image above