International rating agency Standard & Poor's (S&P) has warned that there is a significant chance of cutting India's sovereign rating in the future. The agency in a statement has said that the negative outlook signals at least a one-in-three likelihood of a downgrade of the sovereign rating on India within the next 24 months.
REACTING TO S&P's warnings, apex industry body Assocham said that the threat to downgrade India’s rating is an exaggeration and doesn’t reflect the true state of affairs about the Indian economy where bold reforms process has already commenced with a big bang and the results will follow no sooner than later.
The industry body said that there are no systemic risks to the economy and the recent spate of several important reform measures including permitting Foreign Direct Investment (FDI) in Multi brand retail, and very deft measures for fiscal consolidation by the government reflect the commitment and urgency in mending the economy and to restore investor confidence.
“The response to the various reform measures like FDI in multi brand retail, clarity on retrospective tax laws, firm measures to curtail mounting subsidy on fuel has been well reflected in increased FIIs inflows and positive movements in the capital markets and appreciation of rupee. Therefore the warning of S & P that India still stands the risk of further downgrade is an overstatement and unwarranted,” said Rajkumar N. Dhoot, President, Assocham, in statement.
He further said that the process may take some time but seems to be well underway and 'we are very sure that the Indian economy will be back in the growth trajectory'. Under these circumstances, the rating agency has clearly over done the threat perception to Indian economy.
Notably, the S&P downgrade warning came a day after the International Monetary Fund (IMF) trimmed India's growth forecast for the calendar year 2012 to 4.9%.