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S&P to cut India's sovereign rating if economic slump persists

The agency, however, has maintained a BBB- rating for India, which is its lowest investment grade rating. Anything below this grade would adversely impact India’s benchmark 10-year bond yields, which are already on a performance slump. Economic affairs secretary had on Dec 3 tweeted that S&P has reaffirmed sovereign rating at BBB- with stable outlook.

ET Bureau|
Dec 11, 2019, 11.23 PM IST
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Mumbai: Standard & Poor Global Ratings has said it will downgrade India's sovereign rating if the country's economic growth does not recover, in a note released on Wednesday in form of frequently asked questions.

The agency, however, has maintained a BBB- rating for India, which is its lowest investment grade rating. Anything below this grade would adversely impact India’s benchmark 10-year bond yields, which are already on a performance slump.

Economic affairs secretary Atanu Chakraborty had on December 3 tweeted that S&P has reaffirmed sovereign rating at BBB- with stable outlook. “They have stated that India’s economy continues to achieve impressive long-term growth rates despite a recent deceleration," Chakraborty had said in his tweet.

India’s long term economic outperformance remains intact, despite relatively weaker growth expectations this fiscal year, the agency said. “If this recovery does not materialise, and it becomes clear that India's structural growth has significantly deteriorated, we could lower the rating," said S&P Global Ratings credit analyst Andrew Wood.

This year looks particularly difficult for the general government’s fiscal position given the sluggish revenue resulting from pected impact of the corporate tax cuts, the report mentioned. However, the global rating agency counted the tax cut as a positive step towards addressing structural weaknesses in the economy as it expected private investment to pick up as a result.

Moody’s Investors Service downgraded India’s outlook to negative from stable in November though it rates the country a notch higher than S&P. S&P has downgraded forecast for India’s GDP growth to 5.1% for FY20. The economy expanded 4.5% in July-September, slowing for a sixth straight quarter.

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