India still faces risk of negative rating: S&P

India faced a one-in-three chance of a credit rating downgrade despite the current spate of policy changes to allow more foreign investments, credit rating agency Standard & Poor's said today.

S&P's current credit rating for India is `BBB-', which is just one notch above junk grade. The ratings agency had downgraded India in April (See: S&P downgrades India's long-term credit rating to negative).
The BBB- credit rating for India is the lowest investment rating for any large emerging economies in the BRICS grouping.

Although the recent shifts in policy allowing more FDI in areas like retail trading, airlines, power trading, broadcast services etc, announced in September had slightly improved the country's prospects, the outlook could still turn negative over the next 24 months, S&P said.

Despite all the prodding by business interests and the Western economic powers, India has not so far opened up the strategic financial services, insurance and pension sectors fully to foreign investment.

"A downgrade is likely if the country's economic growth prospects dim, its external position deteriorates, its political climate worsens, or fiscal reforms slow," the ratings agency said in its latest report.

S&P analyst Kim Eng Tan said the reform measures had helped in "slightly" revising S&P's view on India's rating.