Retaining India's sovereign rating
at the lowest investment grade, global agency S&P on Tuesday warned that a downgrade is likely for the country if its political climate worsens and pace of fiscal reforms slows down.
S&P said it expects only modest reforms
in government's finances as well as in the public sector due to the general elections due in mid-2014.
"The fiscal deficit target of 4.5 per cent of GDP for 2014 may be beyond its reach," the ratings agency said, adding the "bloated" fiscal deficit and the heavy debt burden are the most significant rating constraints.
"The negative outlook signals at least a one-in-three likelihood of a downgrade within the next 24 months. A downgrade is likely if India's economic growth prospects dim, its external position deteriorates, its political climate worsens, or fiscal reforms slow," S&P said in a report.
The agency had in April downgraded India's rating to BBB-minus from BBB stable.
The current rating is the lowest investment grade rating among the BRIC economies. S&P had in June warned of rating downgrade.