S&P downgrades India's credit outlook to negative

New Delhi, Apr 25 (PTI) Already battling a perception of policy paralysis, the Indian government was today at the receiving end of global rating agency S&P that downgraded country's credit outlook to 'negative' and warned of a downgrade if there is no improvement in the fiscal situation and political climate. Adding to its discomfort, Moody's Analytics, a wing of global rating agency Moody's, said India is growing below its potential as politics was weighing on the economy with its national government acting as the "single biggest drag" on business activity. Unfazed by these comments, Finance Minister Pranab Mukherjee said the government was not feeling panicky but it was concerned and will take note of the "timely warning". However, the Opposition latched on to the ratings and attacked the government saying it was solely responsible for the "policy paralysis" of the last few years. Reflecting deep-seated problems facing the economy,Standard & Poor's cut India's credit rating outlook to negative from stable. Warning of a downgrade if country's fiscal situation does not improve, S&P restated the country's long term rating of BBB-, just a notch above junk, sending stocks and rupee lower. India's outlook is still underachieving and poor management has dragged economic growth to below potential, Moody's Analytics Senior Economist Glenn Levine said. The Congress 's first family -- party president Sonia Gandhi and her son Rahul Gandhi -- also came under criticism from Levine who said they "blew their chance" to restart the legislative process. He said weighed down by corruption and funding scandals, the government has passed no bills and progress is unlikely on bills covering pressing issues such as land reforms, fuel subsidies, labour rights and the much discussed retail sector reforms between now and elections in 2014. Analysts said the S&P downgrade may increase cost of overseas borrowing for local companies and make it harder to refinance debt and may have a bearing on foreign investor confidence. S&P credit analyst Takahira Ogawa said: "The outlook revision reflects our view of at least a one-in-three likelihood of a downgrade if the external position continues to deteriorate, growth prospects diminish, or progress on fiscal reforms remains slow in a weakened political setting". S&P also lowered the ratings outlook on software firms Infosys Ltd, Tata Consultancy Services and Wipro to negative, in line with the sovereign rating outlook. It reaffirmed the 'BBB-plus' credit ratings on all three firms. Mukherjee played down the significance of the S&P move but admitted that there were "difficulties". "So far as growth and other projections in the budget are concerned, I am confident that we will be able to stick to the numbers and there is no need of being panicky. Situation may be difficult but surely we have confidence that we will overcome these difficulties," he told reporters here. "I am concerned (about the ratings) but I dont feel panicky because I am confident that our economy will grow at 7 per cent," he said. Senior BJP leader and Leader of the Opposition in Rajya Sabha Arun Jaitley said India was in the company of nations which are considered to be doing worse in economy and blamed the government for it. PTI