S&P outlook cut: No need for panic, says Pranab

Finance Minister Pranab Mukherjee said there is "no need for panic" after the rating agency Standard & Poor's cut the country's outlook from stable to negative on Wednesday.

"There is no need for panic," Mukherjee told reporters. "The situation may be difficult, but we will be surely able to overcome it."

Global agency Standard and Poor's (S&P) on Wednesday lowered India's rating outlook to negative and warned of a downgrade in two years if there is no improvement in the fiscal situation and the political climate continues to worsen.

The lowering of outlook from stable (BBB+) to negative (BBB-) is expected to make external commercial borrowings expensive for Indian Inc. It may also have implications for the capital market.

"The outlook revision reflects our view of at least a one-in-three likelihood of a downgrade if the external position continues to deteriorate, growth prospects diminish or progress on fiscal reforms remains slow in a weakened political setting" said S&P's credit analyst Takahira Ogawa in a statement.