India Stares at JUNK rating!

This should be read in continuation of this

Standard & Poor's sniffed at all the extra borrowing, which has raised India's total deficit to about 12% of its gross domestic product, and revised the country's outlook downward to negative from stable. While S&P reaffirmed its BBB- rating, Takahira Ogawa, the analyst who recommended the change, says the ratings agency (which, like BusinessWeek, is owned by The McGraw-Hill Cos. (MHP)) would be watching India's fiscal condition closely for the next few months. "We see more possibility for a downgrade later on down the line," he says. "In a sense, this is a warning."

Any more large expenditures announced by the government could trigger a downgrade, says Ogawa. One big problem: BBB- is the lowest investment grade rating. If S&P does downgrade India, then the country would have a junk rating. That would mean the government would have to pay a painfully high yield on any bonds it issues, both overseas and domestically.

Thank you PM and FM.....

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