Promising more reform initiatives in the next two years, Finance Minister P Chidambaram said there was no serious threat of downgrade to the country’s credit rating by Standard and Poor’s. He said this when asked about his reaction to the recent threat of downgrade of India’s credit rating to junk grade in 24 months by global agency S&P.
Addressing a press conference on the sidelines of the International Monetary Fund-World Bank annual meetings, he said there would be a lot of action on the reforms front in 24 months, the timeline provided by the S&P. “The quota reforms of the International Fund to give greater say to the developing countries in the working of the multi-lateral lending institution is likely to be completed by January 2013,” Chidambaram added.
The rating agency had in its report yesterday said that there was one-in-three likelihood of rating downgrade for India if “the country’s economic growth prospects dim, its external position deteriorates, its potential climate worsens, or fiscal reforms slow.”
The minister said, “(we will) convince them that India does not deserve a downgrade and in terms of growth and growth potential ... India is way above most countries of the world.”
Chidambaram said: “24 months months is a long time. You will see lot of reforms and lot of change, and lot of strengthening of the Indian economy.”
S&P in its report also said it could improve rating outlook from negative to positive if “the government implements initiatives to reduce fiscal deficit, improves its investment climate, and increases growth prospects”. The rating agency in April had changed the rating outlook of India from stable to negative, reflecting the possibility of a downgrade.
The country’s present rating is BBB-(Negative), the lowest investment grade rating, and a downgrade would result in India’s rating slipping to junk status, raising the cost of overseas borrowings by domestic corporates.
India’s economic growth rate during 2011-12 slipped to a nine-year low of 6.5 per cent. According to the estimate of the rating agency, the growth in the current could slip to six per cent.