S&P warns
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While retaining
"We may lower the rating if we conclude that slower government reforms than we currently expect would not lead economic growth to recover to levels experienced earlier this decade," S&P said in a statement on Friday.
'BBB-' is the lowest investment grade and a downgrade would mean pushing the country's sovereign rating to junk status, making overseas borrowings by corporates costlier.
"High fiscal deficits and a heavy government debt burden remain the most significant constraints on our sovereign ratings on
S&P said although part of this slower growth in
"Despite the initiatives from the cabinet committee on investments to cut red tape on infrastructure and power projects, that committee's success in raising investment growth remains uncertain," it said.
Last month during a meeting with S&P representatives, Finance Ministry officials had pitched for a ratings upgrade arguing that the government has been taking steps to contain fiscal deficit and promote investments.
India's long-term growth prospects and its high foreign exchange reserves support the rating, while its large fiscal deficits and a heavy government debt burden constrain it.
"We expect the GDP growth rate of 6 per cent in the current fiscal. Headline and core inflation has come down in recent months," Ogawa said in a conference call.
Asked what could reverse the negative outlook, he said: "If the government carried forward current reform agenda, push some more reforms like land bill, GST as well as narrow down fiscal deficit and CAD and trim subsidies. This could significantly change the outlook".
He, however, said compared to an year ago, there is an easing of pressure on ratings downgrade.
S&P said there could be a rating downgrade in case of anaemic investment growth, reversals on diesel or other subsidy measures, or inability to increase electricity supply to meet increasing demand.
"We believe these measures could restore
It further said it expects the current account deficit (CAD) to improve slightly -- mainly because of lower prices of oil and gold -- but remain high at about 4 percent in the current fiscal year it said.
The CAD, which is the difference between the outflow and inflow of foreign currency, touched a historic high of 6.7 percent in October-December quarter.
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In the current fiscal, the economy is projected to grow at 6.1-6.7 percent, up from the decade's low level of 5 percent growth clocked in 2012-13 fiscal.
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