S&P may revise India's outlook to "stable" if government acts

NEW DELHI: US credit rating agency, Standard & Poor's on Thursday repeated its previous stance that it may revise India's outlook to "stable" from "negative" if the government implements initiatives to reduce structural fiscal deficits, improves investment climate and increases growth prospects.

The comments, made in a report on Asia-Pacific Sovereign Ratings dated Wednesday, reiterate its previously stated stance.

Reiterating its previous comments, S&P said a downgrade is likely if India's economic growth prospects dim, external position deteriorates, political climate worsens, or fiscal reforms slow.

India's sovereign rating is currently at "BBB-minus", the lowest investment grade, which signals at least a one-in-three likelihood of a downgrade within the next 24 months.

On Tuesday, government released the IIP date for the month of January. The industrial output expanded for the first time in three months, an early sign that Asia's third largest economy may have turned a corner.

On Wednesday, Prime Minister Manmohan Singh said government has taken a number of steps to return to the robust growth path in the next two to three years.

The Prime Minister admitted that there has been a slowdown in the economy which has been reflected in the GDP figures.

"Nothing is achieved by dampening the spirit...We have taken steps and in 2-3 years we will return the economy to the robust growth path," Singh said as members of the BJP and Left parties voiced concern over the slowdown in the economy.

He said there were international factors as the world faced two crises -- the banking crisis of 2008-09 and the Eurozone crisis.

"These things do affect the economy. There were domestic issues as well. We are trying to tackle the crisis," he said.

The headline inflation number ticked up marginally for the month of February 2013, but probably won’t be enough to sway the central bank’s decision on rates next week.

“The recent rumblings from the Reserve Bank of India (RBI), including praise for the government’s reforms and recent budget, suggest that a small March rate cut is likely,” Moody’s said in a report.