S&P Says India May Be First BRIC Nation to Lose Investment Grade

[REO 54]

India may become the first BRIC nation to lose its investment-grade credit rating, Standard & Poor’s said, citing slowing growth and political roadblocks to economic policy making.

“Setbacks or reversals in India’s path toward a more liberal economy could hurt its long-term growth prospects and, therefore, its credit quality,” Joydeep Mukherji, an analyst at Standard & Poor’s in New York, said in a statement today.

Indian gross domestic product rose 5.3 percent last quarter from a year earlier, the weakest pace in nine years, stoking concern the nation’s economic prospects have deteriorated as policy gridlock deters investment and Europe’s debt crisis crimps exports. S&P lowered India’s credit outlook to negative from stable in April, dealing a further blow to Prime Minister Manmohan Singh’s development agenda.

The rupee and the stocks dropped. The rupee fell 0.6 percent to 55.78 per dollar at 3:20 p.m. local time, while the BSE India Sensitive Index declined 0.5 percent. The yield on the 8.79 percent note due November 2021 declined two basis points, or 0.02 percentage point, to 8.33 percent.

S&P’s long-term sovereign credit rating on India is BBB-, one level above speculative grade. Aside from India, the BRIC group also includes Brazil, Russia and China.

To contact the reporter on this story: Kartik Goyal in New Delhi at kgoyal@bloomberg.net

http://www.bloomberg.com/news/2012-0...ent-grade.html

[Ishkabibble]

These ratings are a load of bunk.

Let me paraphrase their claim. "India's growth isn't high enough on the (unsustainable) exponential curve. At current rates of growth, their economy will take 13.5 years to double in size. S&P representatives may downgrade India unless the growth rate increases."

What doubling time would be 'investment grade?' Would S&P be happy with 12 years? Perhaps 10? Such rapid growth isn't 'investment grade,' it's investor suicide. When growth is too rapid, a crash often follows.

What would our world look like with India consuming twice what it does today ( 13.5 year doubling time) and China consuming twice what it does today (8% growth = 9 year doubling time)? That's 1.17 billion people for India and 1.38 billion people for China. Are we to assume that things will tick along like clockwork if 2.55 billion people double their consumption within about ten years? The growth rate of developing nations is already much too high. S&P wants higher.

S&P raters are morons.

[Canadian-guerilla]

how can S&P and Moodys have so much power over a country's economic future ?

maybe ( someone who knows ) should start a thread on the history of S&P and Moodys . . .

[Aurumag]

how can S&P and Moodys have so much power over a country's economic future ?

maybe ( someone who knows ) should start a thread on the history of S&P and Moodys . . .

Google knows:

Missing From Moody's Downgrade List? Warren Buffett's Favorite Bank Wells Fargo

From the comments section:

Really? Nothing to do with the fact that Berkshire owns almost 10% of WF and nearly 20% of Moody’s (being its biggest shareholder)? Warren Buffett just rules.

[oldgaranddad]

Sounds like payback to me for India directly trading with countries like Iran and circumventing SWIFT and the current reserve currencies. Just my opinion. Yours may differ.