Rating Agency Standard & Poors’ today said that Indian may become the first country among BRIC (Brazil, Russia, India and China) to lose investment grade rating.
India could lose its investment-grade rating due to slow GDP growth and political roadblocks to economic policy making, said a S&P report titled “Will India Be The First BRIC Fallen Angel?”
After this report came out, both the BSE Sensex and NSE Nifty erased their gains. Even the Indian rupee depreciated 19 paise to 55.61 as against the US dollar. It had appreciated by around 30 paise at one point of time today.
According to recently released report by Standard & Poor’s Ratings Services, titled “Will India Be The First BRIC Fallen Angel?”, the Indian government’s reaction to potentially slower growth and greater vulnerability to economic shocks could largely determine whether the country can maintain an investment-grade rating or become the first “fallen angel” among the BRIC nations (which also comprise Brazil, Russia, and China). The ‘BBB-’ long-term sovereign credit rating on India is currently one notch above speculative grade.
“Setbacks or reversals in India’s path toward a more liberal economy could hurt its long-term growth prospects and, therefore, its credit quality,” said Standard & Poor’s credit analyst Joydeep Mukerji.
Earlier in April 2012, Standard & Poor’s had revised the rating outlook to negative from stable because of India’s lower GDP growth prospects and the risk that its external liquidity and fiscal flexibility may erode. The negative outlook also reflects the risk that Indian authorities may be unable to react to economic shocks quickly and decisively enough to maintain the country’s current creditworthiness.