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 firstname.lastname@example.org