The government on Thursday said the lowering of its long-term sovereign credit outlook to negative from stable by Standard and Poor?s was not fair and that the rating agency overlooked the country?s strong long-term growth potential endorsed by multilateral institutions like the IMF and the World Bank.

A senior government official, who wished not to be named, said,? The rating agency seems to have taken the pessimistic mood of the market as a parameter for assessing the credentials of the country. We do not agree with their methodology to calculate the country’s public debt and its risk assessment.?

Although the ministry has not formed any response to the rating agency, it is assessing the impact of the downward revision of outlook on Indian companies. Earlier in the day, Prime Minister Manmohan Singh discussed with chief economic advisor Kaushik Basu the implications of the rating outlook downgrade on the economy.

The official said, we had pointed out a few minor factual errors in the S&P report, when it was sent to the ministry on Wednesday, before its publication. The ministry feels the concerns raised by the agency are very much on the government’s agenda but it should also have taken into account the measures taken by the government to improve investment in the country.

S&P on Wednesday revised the outlook on India’s long-term credit rating to ?negative’ from ?stable’. The agency kept India’s credit rating on its long-term rupee debt unchanged at (BBB-), the lowest investment grade given by the agency.

In its statement S&P had said, ?The outlook revision reflects our view of at least a one-in-three likelihood of a downgrade if the external position continues to deteriorate, growth prospects diminish, or progress on fiscal reforms remains slow in a weakened political setting.?

The agency added, ?India’s large fiscal deficits and debt, as well as its lower middle-income economy, constrain the ratings,?. The ministry feels S&P’s assessment is not correct in regard to the public debt situation. India’s total debt to GDP ratio is estimated to be 45.7% for the 2011-12 fiscal, an improvement over 46% calculated for 2010-11. The government expects its total debt to come down to 45.5% of GDP in 2012-13.

The official said,?The rating agency feels the higher debt burden will pose a greater risk for the country. Our view is that the majority of our public debt is financed in domestic currency and our exposure to debt in foreign currency is very small. Hence the risk on this count is far lower than that of other countries?.

India’s foreign currency denominated debt or external debt was just 7.9% of total public debt in 2010-11 and the government expects it come down further.

S&P has said India’s per captia growth is lower and hence the government has little scope to increase taxes. Officials, however, argue that per capita income alone should not be the criteria to assess the income levels.

?We expect India’s real GDP per capita growth will likely remain moderately strong at 5.3% in the current fiscal ending March 31, 2013, compared with about 6% on average over the prior five years, but down from 8% in the middle of the last decade,? Takahira Ogawa, credit analyst of S&P said.