India’s sovereign outlook remains negative on S&P ratings

Global sovereign rating agency Standard & Poor’s said it will maintain negative outlook for the India as currency depreciation is adversely impacting investors’ confidence. They will maintain a negative outlook on India’s BBB sovereign credit ratings. S&P’s statement came when the rupee slid down to a record low of 64.11 to a dollar.

What is BBB?

BBB is the lowest investment grade and a downgrade would mean pushing the country’s sovereign rating to junk status making overseas borrowings by corporates costlier.

According to S&P:
  • India’s long term growth prospects could weaken on a sustained basis, with negative implications for the sovereign credit fundamentals.
  • The capital outflows and depreciating rupee is an indication of weakening investor confidence in India. This is a result of the declining economic growth in the past two years and insufficient long term policy response that could reverse the decline and revive investments.
  • Investments continue to be strangled by inadequate infrastructure, rigidities in labour and product markets, and red tape, among other issues.
  • Future credit rating action would depend upon the response of policy-makers to the latest economic developments.

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