Fitch's move to lower the country's credit rating to negative from stable comes less than three months after rival Standard & Poor's did a similar downgrade.
India faces an "awkward combination" of slow growth and elevated inflation as well as structural challenges surrounding its investment climate in the form of corruption and inadequate economic reforms, Fitch Ratings said in a release today.
Finance Minister Pranab rejected the Fitch revision saying it was based on "older data" as it ignored recent positive trends.
"While the markets had already anticipated that Fitch would revise the outlook and so there is no surprise in the announcement, it must be pointed out that Fitch has primarily relied on older data, and has ignored the recent positive trends in the Indian economy," Mukherjee said in a statement.
Chief Economic Advisor Kaushik Basu said he was not surprised by the rating action.
"There is a herd mentality among policymakers, herd mentality among corporates. There is also little bit of herding among credit rating agencies. We were pretty much expecting Fitch to do so," Basu said.
According to Fitch, the outlook revision reflects heightened risks that India's medium to long-term growth potential would gradually deteriorate if further structural reforms are not hastened, including measures to enhance the effectiveness of the government and create a more positive operational environment for business and private investments.
Fitch also downgraded the credit outlook of seven PSUs -- NTPC, SAIL, IOC, PFC, GAIL, REC and NHPC. (MORE)
