S&P has maintained India’s sovereign rating at BBB- but the outlook has been revised downward to ‘negative’. This action is based on factors that are already widely known. Importantly, at this stage it is just an outlook change and not a ratings downgrade. To that extent, it is more of a warning of increasing vulnerabilities of the country. Nonetheless, the action can impact Indian Rupee in the near term, which is already under pressure and perhaps raise external borrowing costs for some of the corporate. However, the silver lining could be that this action could exert pressure on the government to act on fiscal front (possibly by raising the diesel prices etc) as well as on policy front.
Analysts on the Street have already written about the deteriorating confidence of Corporates in the Congress Government headed by Dr. Singh. Even Mr. Deepak Parkeh has openly criticized the Government, but Government puts the blame on Coalition Politics without making even an inch of effort to resolve the Crisis of Business Confidence.
History has always told us that when the Government headed by Congress exits, Nations Coffers are Emptied and she will be in heavy Debt. Will Dr. Singh and his cabinet colleagues empty the central coffers this time too ?