Mumbai: Analysts and economists on Wednesday termed Standard & Poor's decision to lower the country's rating outlook close to junk status (BBB-) as "reactionary and out of context", saying there has been "no immediate trigger".
"It is not warranted at all now, though concerns remain. It is too premature for S&P to do it now. These issues were in place already. S&P is very reactive but Moody's is balanced," State Bank of India economic research head Brinda Jagirdas told.
Terming the action as "not a downgrade but only highlights the already existing concerns" which the government is seized of, she said these concerns were known and did not warrant a change in the outlook. "There is no trigger for S&P to do it now. So I would say this is only a reactive action."
S&P on Wednesday cut its India outlook to negative from stable, and warned of a sovereign downgrade in two years if the fiscal and current account situations do not improve and the political climate continues to worsen.
"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," said S&P credit analyst Takahira Ogawa.
BBB- is the lowest investment grade rating.
"A downgrade is likely if the country's economic growth prospects is dim, its external position deteriorates, its political climate worsens, or fiscal reforms slow," the agency said.
But Jagirdas said the move will not have any impact on the cost of funds for either the banks or the corporates.
Pointing out that "the country has good savings and investment rates", she said "our fiscal deficit is much better than most of the European economies."