S&P lowers growth forecast for India to 5.5%

Updated: Monday, September 24, 2012, 15:34 [IST]

Standard & Poor's, global rating agencies lowered growth forecast for India by 1% to 5.5% due to poor monsoon, unresolved eurozone crises and sluggish recovery in US economy.

Earlier, Moody's Analytics has cut India's growth forecast to 5.5% for this year. Brokerage house CLSA had cut its forecast for Indian GDP growth to 5.5% for FY 2013, from its earlier projection of 6%.

CRISIL Research had cut India's real GDP growth forecast for 2012-13 to 5.5% from its earlier forecast of 6.5%.

A series of GDP down grades have happened from leading brokerage firms and rating agencies.

Earlier in April S&P scaled down India's credit rating outlook from ‘stable' (BBB+) to ‘negative' (BBB-) with a warning of a downgrade if there was no improvement in the fiscal situation and political climate.

India moved to the investment grade rating in 2007 and has been stable at an S&P BBB-, but this changed in April with the stable outlook changing to negative by S&P.

The agency has now said that India was likely to be downgraded to junk status. A junk status means that cost of funds for the country and the company when tapping money from aboard is going to get costlier and it could also spark a sell off in the stock markets, as the country becomes a risky investment destination.

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