India Could Be Downgraded to Junk

India rupee | BCBusiness
Despite being an emerging economic powerhouse, India is in danger of having its credit rating downgraded to junk levels.

Standard & Poor’s warns the burgeoning economic powerhouse’s credit rating could soon be reduced to junk levels.

India could soon be labelled a “fallen angel,” according to Standard & Poor’s.
 
The nation’s slowing economic growth and political stalemates could force the rating service to slash its investment grade credit rating in the near future.
 
S&P released a report Monday, titled Will India Be the First BRIC Fallen Angel?, cautioning that Asia’s third-largest economy is in danger of being the first to falter among the BRIC nations (Brazil, Russia, India and China, which have all experienced exponential economic growth in the last few years).
 
Currently, India’s credit rating sits at BBB-/Negative/A-3, just one precarious notch above junk.
 
S&P blames slowed growth as one major factor in the rating cut, and the numbers aren’t adding up in India’s favour. The economy fell to its lowest growth rate in almost a decade at just 5.3 per cent. The Indian rupee also tumbled to a new low against the American greenback, inflation on food items hit double digits and the country’s quickly compounding deficit has all frightened potential investors.
 
A grade cut would negatively affect investor sentiment and India would have to pay more to borrow money from other countries. Basically, fiscal troubles in one of the world’s booming economies — not to mention Europe’s mounting fiscal crisis — could spell a slowdown globally.