Fitch Ratings, which recently lowered
India's credit outlook to negative, has said the possibility of downgrading the
country's sovereign rating is more than 50 per cent in the next 12-24 months.
"The negative outlook suggests there is a more than likely chance of Fitch revising rating downwards from 'BBB-' to 'BB+' in the next 12 to 24 months. When we say more than likely chance, this essentially translates into more than 50 per cent chance," Art Woo, director in Fitch's APAC Sovereigns team, said.
The comments were made in reply to emailed queries on the possibility of Fitch revising India's credit rating. Fitch had lowered India's credit outlook to negative from stable on June 15. The downgrade of credit outlook indicated that the country's medium-to long-term growth potential could gradually deteriorate if further structural reforms are not hastened to create a more positive operational environment for business and private investments.
Downgrading sovereign rating could impact investor sentiments and could lead to higher borrowing costs.
Stating that investment climate in India appears to be facing structural challenges, the rating agency observed the government's recent decision to review tax proposals such as GAAR does not come as "too surprising". "India appears to be facing structural challenges surrounding its investment climate. Therefore, the decision to review certain tax proposals should not be considered too surprising," Woo said on queries related to the proposals for a new taxation regime, the General Anti Avoidance Rules (GAAR).
Meanwhile, on August 9,
rating agency Mooody's had slashed economic growth projection to expand 5.5 per cent this year amid turbulent global conditions, domestic policy mis-steps and poor monsoon.
The government, in the 2012-13 Budget, had projected an economic growth of 7.6 per cent.
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