India ratings constrained by slowing growth, says S&P

MUMBAI Fri Mar 15, 2013 2:53pm IST

1 of 2. Labourers work at a construction site as sun sets in New Delhi February 16, 2008.

Credit: Reuters/Adnan Abidi/Files

Related Topics

MUMBAI (Reuters) - The slowdown in India's economic growth is less supportive for the country's sovereign credit ratings, and the government may find it challenging to meet the revenue projections in its 2013/14 budget, an analyst at Standard & Poor's said on Friday.

The comments, although not drastically different from the rating agency's previous stance, nonetheless hit Indian shares and bonds, highlighting lingering concerns that the country may lose its investment-grade rating.

S&P rates India at "BBB-minus", one notch above junk, and cut its outlook to "negative" from "stable" last year, denoting a one-in-three possibility of a ratings downgrade.

"Economic support has weakened somewhat," Kim Eng Tan, senior director of Asia-Pacific Sovereign Ratings said during a webcast about global ratings on Friday.

India's economic growth has slowed dramatically to just 4.5 percent in the October-December quarter of 2012 from more than 9 percent in early 2011.

Tan added that the revenue projections in the recent budget for the next fiscal year could pose "significant challenges" for the government, although he added it was not "entirely out of reach".

The budget for the fiscal year starting in April relies on a projected increase in revenue to fund a planned 16 percent rise in spending, while still intending to narrow the fiscal deficit to 4.8 percent of gross domestic product from 5.2 percent in the current year.

However, some analysts have expressed concerns the budget may be too optimistic, especially about tax revenues, given the slowdown in economic growth.

"The economic conditions will have to remain relatively strong" for the government to meet its projections and meet its fiscal deficit targets, Tan said on Friday.

The BSE Sensex was down 0.5 percent as of 2:16 p.m., while the benchmark 10-year yield rose 2 basis points to trade flat on the day at 7.86 percent after the S&P comments.

(Reporting by Subhadip Sircar and Neha Dasgupta; Editing by Rafael Nam & Kim Coghill)

FILED UNDER:
We welcome comments that advance the story through relevant opinion, anecdotes, links and data. If you see a comment that you believe is irrelevant or inappropriate, you can flag it to our editors by using the report abuse links. Views expressed in the comments do not represent those of Reuters. For more information on our comment policy, see http://blogs.reuters.com/fulldisclosure/2010/09/27/toward-a-more-thoughtful-conversation-on-stories/
Comments (1)
Anirudha_n wrote:
I really don’t trust these ratings agency anymore. Who knows to tarnish India’s image its being paid by its enemies!! the same way S&P was paid up by wall street banks to rate Junk CDO’s as investment grade.

Mar 15, 2013 1:01pm IST  --  Report as abuse
This discussion is now closed. We welcome comments on our articles for a limited period after their publication.

  • Most Popular
  • Most Shared

REUTERS SHOWCASE

Global Trade Deal

Global Trade Deal

Rural votes, old traumas drive India's WTO brinkmanship.`  Full Article 

E-Commerce Funding

E-Commerce Funding

E-tailer Flipkart raises $1 billion in funding.  Full Article 

Chopper Deal

Chopper Deal

Finmeccanica settles with Italy prosecutors to end Indian chopper deal probe.  Full Article 

Adani Project

Adani Project

Australia approves Adani's $16 bln Carmichael coal project  Full Article 

New Frontiers

New Frontiers

EXCLUSIVE - Goldman moves executive to new role building ETFs.  Full Article 

India-U.S. Talks

India-U.S. Talks

Kerry to woo Modi's India, but quick progress unlikely  Full Article 

Argentina Debt Default

Argentina Debt Default

Insight - Jaded Argentines brace for looming debt default   Full Article 

Anti-trust Probe

Anti-trust Probe

Microsoft targeted in apparent Chinese anti-trust probe  Full Article 

Gaza Conflict

Gaza Conflict

Israel strikes house of Hamas Gaza leader, digs in for long fight.  Full Article 

Reuters India Mobile

Reuters India Mobile

Get the latest news on the go. Visit Reuters India on your mobile device.  Full Coverage