Despite the recent initiatives taken by the government to kick-start the reform process and speed up the economic growth, ratings agency S&P has retained its negative outlook on India.
The rating noted a marked slowdown in real growth, which complicates the government's debt dynamics and ability to implement reforms. The ratings agency has affirmed India's rating at BBB-/A-3.
In another blow for the government, S&P also said that it would review India's sovereign rating after elections. The rating agency also had a warning for the next government: "The outlook remains negative, indicating that we may lower the rating to speculative grade next year if the government that takes office after the general election does not appear capable of reversing India's low economic growth," it said.
The rating agency had earlier in August this year had also reiterated its negative outlook on India, expressing concerns over India's fiscal and current account deficits. This had led to Finance Minister P Chidambaram expressing unhappiness over the rating, who said that the country had taken a lot of initiatives to improve the macroeconomic situation.
Ever since S&P's August rating, the government and the RBI have taken a number of measures to improve the macroeconomic situation. As a result the rupee has sharply recovered over 10 percent. Recently, the finance minister also said the Indian economy showed signs of recovery. Mr Chidambaram also reiterated that the fiscal deficit target would not be breached and also lowered this fiscal's current account deficit to below $60 billion.
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