S&P: India's rating may be pressured if polls end in hung parliament

MUMBAI: India's sovereign rating may come under pressure if general elections due by May next year end up with a hung parliament or with a government unable to push through reforms, Standard & Poor's said on Wednesday.

"If it is a hung parliament or if the government is unable to effect reforms, definitely by implication the rating will come under pressure," said Terry Chan, credit analyst at Standard & Poor's during a teleconference with reporters.

S&P has a "negative" outlook on India's sovereign ratings, meaning any downgrade from its current "BBB-minus" would place the country's debt in so-called "junk."

Earlier in the day, Finance Minister P Chidambaram said the government will stick to the path of fiscal consolidation and endeavour to narrow the deficit to 3 per cent of gross domestic product by 2016-17.

"The agenda (is) obvious. At the top of the list is fiscal consolidation. There can be no compromise -- and I speak for the government -- there will be no compromise on the decision to walk on the path of fiscal prudence and contain the fiscal deficit step by step, year by year, until we reach the goal of 3 per cent of GDP in 2016-17," he said.

Rating agency Fitch yesterday expressed apprehension that the poor performance of the Congress in the recent assembly elections could push up the Centre's fiscal deficit as there may be an "increased likelihood of political pressure to limit expenditure cut-backs."

The setback faced by the Congress in the state elections, it added, "could potentially raise political pressure on the government's near-term fiscal goals."

The Congress was defeated in the elections held in Madhya Pradesh, Chhattisgarh, Rajasthan and Delhi.