India dismisses Standard & Poor's projection of credit rating downgrade

A top finance ministry official on Wednesday said the Indian economy does not have to fear a downgrade, as warned by some ratings agencies, since some key domestic factors will ensure continued confidence of the investing world.

"Crystal-gazing", is how Department of Economic Affairs Secretary Arvind Mayaram described warnings of a downgrade by ratings agencies, while speaking to journalists on the way to attend the G20 Summit in St. Petersburg as part of Prime Minister Manmohan Singh's official delegation.

The remarks come a day after Standard and Poor's said that the chances of India getting downgraded over the next two-three years were one-in-three, and higher than that of Indonesia - a statement that was one of the reasons that led the Indian stocks to crash Tuesday. But Mayaram said it was also important to go into what specifically the agency said.

"What did they say - the chances of India getting downgraded over the next three years have increased by 33 per cent. I will be really interested on knowing why 33 per cent and not 32.5 per cent?" he queried. "It can only be crystal gazing. There can be no mathematical model for that," he added. "So it (warning) should only be taken in the manner in which it has been stated. I don't think there is any case for that (downgrade). We have faced such situation in the past. We have taken measures. We are taking measures, which are, to the extent possible stabilising the economy."

Mayaram also said three factors will ensure that India continues to enjoy the confidence of global investors - and it pertained to growth, robust farm output and substantial infrastructure spending approved by the federal cabinet presided over by the prime minister.

He said the low growth of 4.4 per cent in the first quarter of this fiscal was an aberration - a spill-over effect of the gloom from the previous fiscal and that the economy will bounce back in the third and the fourth quarter for a reasonable all-round growth.

Second, Mayaram said, there has been a 9 per cent increase in the sowing area of agricultural crops this season, compared with that for the previous season. "As a result, we expect a bumper crop this year, which will add at least 1 per cent to our GDP (gross domestic product)."

Third, he said, the amount approved by the Cabinet Committee on Investment for various projects between January and June was close to $30 billion.

"These are very large projects. By third-fourth quarter investments will start flowing in," Mayaram said, alluding these will also lift the economy.