Standard & Poor's cut India’s Credit Rating Outlook to Negative

Standard & Poor's downgraded credit rating outlook for India to negative from stable on 25 April 2012. The cut in credit rating is the reflection of India's widening fiscal and current account deficits.

The negative outlook jeopardises India's long-term rating of BBB-, the lowest investment grade rating, and sent Indian bonds, stocks and the rupee lower.

India has no sovereign global bond issues, but a downgrade would increase borrowing costs for local companies and make it harder to refinance debt, and may have a further chilling effect on foreign investor confidence in the country in general.

India's fiscal deficit widened to 5.9% of gross domestic product in the fiscal year 2011-12, starkly higher than the government's target of 4.6%. The country is performing equally bad on the front of foreign institutional investment as it witnessed a sharp decline in the FII over the past few months.  India has drawn nearly 171.8 million dollar FII so far in April 2012 against more than 5 billion dollar in February 2012.
The credit rating downgrading indicates that the government will now have to contemplate seriously over the long-pending economic reforms and push them through as soon as possible.