Global credit rating agency Standard & Poor’s (S&P) recently reinstated its negative outlook on India’s already low BBB- sovereign credit rating and warned that India’s rating could be downgraded to junk if pending economic reforms are not implemented. This took New Delhi by surprise as it had lobbied strongly in the opposite direction – for an upgrade with S&P analysts.
If we are relegated to junk status, we will see reduced foreign investment and higher borrowing costs for Indian firms. Instead of speculating on the motives and expectations of credit rating agencies, the government should focus on reviving growth with ambitious investment projects like the Delhi-Mumbai Industrial Corridor and reduced regulatory burdens on SMEs.
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