Global rating agency Standard & Poor's warned on Wednesday that India still faced a "one-in-three" chance of a credit rating downgrade within the next two years, despite last month's blitz of new economic reforms to boost the sharply-flagging economy.
"In our view, there is a significant chance that this trend (of weaker global economic prospects and Indian domestic policy instability) could eventually affect political, economic, fiscal or external factors to lower the credit rating on India," S&P said, as cited by the Wall Street Journal.
"A downgrade is likely if the country's economic growth prospects dim, its external position deteriorates, its political climate worsens, or fiscal reforms slow," it later added.
Earlier this year, S&P had revised its outlook on India's BBB-minus rating from stable to negative. BBB-minus is just one notch above 'junk' territory - making India's investment rating the lowest among the BRIC economies.
According to WSJ, fellow rating agencies - Moody's Investors Service and Fitch Ratings - have also placed India at their lowest invest grades, while Fitch, like S&P, has placed a negative outlook on India's sovereign rating.
In September, the Indian government announced a slew of new measures - including cutting diesel subsidies and promoting foreign investment - to support growth and reduce spending. But while S&P acknowledged that these steps may help stop economic growth from weakening, it called for further action by the government to "increase growth prospects."
"After a long wait, the government seems to have reignited reform efforts, and that bodes well for the future development of the country," the ratings agency said, as cited by AFP.
"We may revise the outlook back to stable if the government implements initiatives to reduce structural fiscal deficits, improve its investment climate and increase growth prospects," it said.
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According to the latest forecast released by the IMF this week, India's economy is likely to grow by just 4.9 percent this year - its slowest pace in a decade.
The outlook for India is unusually uncertain,"said the IMF, who predicted that the "current drags on business sentiment and investment will persist."