Rising risks to Indian investment grade rating: S&P

[Naveed Yaseen]

MUMBAI: India risks losing its investment-grade credit rating if it is unable to contain rising inflation and widening fiscal and current account deficits, Standard & Poor’s Ratings Services said on Friday.

“We are seeing increasing risks to India’s “BBB-”rating from rising fiscal deficits, rising inflation, and to a lesser extent, widening current account deficits,” Takahira Ogawa, primary credit analyst at Standard and Poor’s, wrote in a report.

“Failure to respond adequately to negative developments as they arise in this pre-election period could point to a sustained deterioration in macroeconomic stability and thus increase the probability that the government’s ratings could be lowered to speculative grade,” it said.

S&P raised India’s rating to “BBB-/Stable/A-3” in January 2007, the lowest rung of investment grade. Sovereign ratings tend to be a cap on corporate ratings, and as such affect the interest rates at which companies can raise funds overseas.

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