Global credit ratings
agency Standard & Poor's (S&P) has said there is a "one in three" chance of a downgrade of
India's sovereign rating to junk status in the next two years.
In June, the credit rating agency had revised its outlook on
the present BBB- rating to negative , which is one notch above junk grade and the lowest investment rating among the BRIC economies.
On the upside, especially given the slew of
reform measures carried out by the government in the past three weeks, the outlook can be revised upwards to stable if the government succeeds in reducing fiscal deficit, improve the investment climate and revives growth, S&P said.
"The negative outlook signals at least a one-in-three likelihood of a downgrade of the sovereign rating on India within the next 24 months," S&P analysts Takahira Ogawa and Elena Okorochenko said in a note issued on Wednesday.
Factors forcing a downgrade would be a drop in growth prospects, deterioration on the external front,
worsening of the political climate and slow movement on fiscal reforms.
S&P estimates the fiscal deficit to shoot up to 6 per cent from the targeted 5.1 per cent this financial year, and growth to fall to 5.5 per cent compared to the government's revised projection of 6.5 per cent.
"Fiscal measures to lower deficits could include a more efficient use of fuel, fertiliser, and agricultural subsidies, or the implementation of a goods and service tax," it suggested.
With inputs from PTI 
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