Global credit rating agency Standard and Poor’s Ratings Services (S&P) warned there was a one-in-three chance of the country’s sovereign rating being downgraded to junk status in the next 12 months. If the rating agency does act on its warning, not only will it raise the overseas cost of borrowing for Indian companies, it will also adversely impact the country’s image as an attractive foreign investment destination.

While S&P acknowledged recent policy initiatives and fiscal consolidation measures undertaken by the government, the rating agency maintained that it may downgrade India if it perceived any reversal of the initiatives or worsening outlook on the external sector.

S&P, which cut India’s rating outlook to negative from stable in April last year, warned for the first time in October that the country has a one-in-three likelihood of a downgrade of its sovereign rating within the next 24 months.

Source: Livemint.com