India May Lose Investment-Grade Rating: S&P Report

Mumbai: Citing economic slowdown and political roadblocks to policy-making, rating agency S&P warned India could become the first BRIC nation to lose investment-grade rating. The country’s sovereign rating is `BBB—’, the lowest investment grading and in April S&P lowered its outlook on the rating to negative from stable for India. Standard & Poor’s (S&P) today released a report titled `Will India be the first BRIC fallen angel?’ “Setbacks or reversals in India’s path toward a more liberal economy could hurt its long-term growth prospects and, therefore, its credit quality,” S&P’s credit analyst Joydeep Mukerji said in the report. S&P had upgraded India to investment grade BBB rating in January 2007, after four years of above nine per cent growth. BRIC refers to the high-growth economies of Brazil, Russia, India and China. The other three BRIC members enjoy a higher rating or outlook than India’s at present, S&P said. The report comes at a time when some commentators are wondering if the `I’ in BRIC now stands for Indonesia, which has been delivering good growth in recent times. The economic growth fell to nine-year low of 5.3 per cent for the three months ended March 2012, while the overall growth for FY12 stood at 6.5 per cent, lower than the 6.7 per cent clocked during the peak of the credit crisis in the Western world. “Failure to advance with more liberalisation might reduce India’s long-term growth potential and thus hurt sovereign rating,” the S&P report said, wondering if “there is a risk that economic liberalisation may not just stall, but could even recede?”.