India May Struggle To Keep Its Stable Rating

06 February 2012 - Which Way to Pay

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India May Struggle To Keep Its Stable Rating

Rating Agency Standard and Poor’s have said that high inflation along with slower economic growth and a weak government fiscal position will negatively impact India’s sovereign rating. The report did say, “Like many countries, India is facing some challenges on a few fronts, and the balance of risk factors for the sovereign credit rating may be shifting toward the negative.” The report titled, ‘Several Factors Could Weigh On India’s Current Stable Sovereign Rating 2012,” has suggested that India will face many challenges in order to keep its stable rating outlook. This won’t be welcomed news as India has managed to retain stability and achieved continued growth despite the European debt crisis and weakening prospects in the U.S. 

Takahira Ogawa, director at Standard and Poor’s said India was likely to grow slower than normal in the near future as “Uncertainty in global financial markets and Europeans sovereign debt problems could add to pressures on India.”  He also added, “India has been grappling with a political gridlock and the government’s ability to implement measures to improve economic growth and fiscal prudence will be vital to boosting confidence. But, according the research firm Ipsos, the global economic environment and the government’s “policy paralysis” has caused a decline in Indian confidence.  Despite the difficulties S&P said that it did not expect to downgrade or revise its stable outlook on the investment grade ‘BBB-‘ long term sovereign credit rating on India in the near future.  Having said this Mr Ogawa warned that the negative factors coupled with the government’s weak policy implementation, could lead to a tipping point.

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Several Factors Could Weigh On India's Current Stable Sovereign Rating In 2012
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