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Cutting its economic growth estimate for India to 4.8 per cent this fiscal, global rating agency S&P today said a hung Parliament post 2014 general elections or the government's inability to usher in reforms will put country's sovereign rating under pressure.
"If it is a hung Parliament or if the government is unable to effect reforms, definitely by implication the rating will come under pressure," Terry Chan, credit analyst at S&P, told reporters during a teleconference.
The Parliamentary elections are due by mid-2014.
The agency cut its estimate on the country's GDP growth this fiscal to 4.8 per cent, stating the spate of reforms undertaken in the recent past will bear fruit soon and growth will go to 6 per cent. It, however, did not give a timeline for the same.
"India's growth forecast has been cut further to 4.8 per cent in fiscal 2013-2014 in view of the weak investment outlook," it said.
The agency, however, added that growth can slip to 4.7 per cent next fiscal on a fractured government mandate, monsoons turning unfavourable and industrial production losing the momentum. "Unlike the rest of the (Asia-Pacific) region, risks are more on the downside than upside (in India)."
The government has been targeting a growth rate of over 5 per cent for FY'14. The GDP growth, which had come in at 4.4 per cent in the first quarter, moved up to 4.8 per cent in the second quarter.
S&P had last fiscal threatened to downgrade sovereign rating of Asia's third largest economy on concerns over growth, fiscal imprudence and a perceived policy paralysis.
This led to a series of steps from the government, which finally resulted in the fiscal deficit target being met through massive expenditure cuts.
On inflation, S&P said the consumer price inflation will cool down to 6 per cent in 2014. It expected key policy rates to remain unchanged at the current levels from here on.
Hung Parliament to put sovereign rating under pressure: S&P
(Reuters) India's sovereign rating may come under pressure if general elections due by May next year end up with a hung Parliament