New Delhi: Finance Minister Pranab Mukherjee has rejected Standard & Poor's warning to strip India of the investment-grade rating, saying that there is no evidence to suggest that the country is more prone to shocks now than it was in April, when the rating agency had lowered the outlook on India from 'stable' to 'negative'.
"...between April 2012 and now, there are no significant events to indicate that the economy's vulnerability to shocks has increased," Mukherjee said in a statement.
Earlier Monday, S&P cautioned that India could become the first among BRIC nations to lose its investment-grade rating primarily on account of slowing economic growth and political logjam that has held back key fiscal policy reforms, less than two months after the rating agency cut its outlook on India citing similar reasons.
India's gross domestic product (GDP) grew by a dismal 5.3% on-year in the March quarter, the lowest in nine years. While the government has hardly been able to push major reform measures in the face of stiff opposition, most of the time from its own allies.
"The government is fully seized of the current situation and is confident that there will be a turnaround in our growth prospects in the coming months," Mukherjee said.
The turnaround will come on the back of monetary policy easing, revival of mining sector growth and progress on fuel-linkage for coal-based power projects, he said.
A normal monsoon prediction for this year and decline in international crude oil prices are also some positives for the economy, he added.
Moreover, foreign institutional investors (FIIs) pumped in $12 billion in the first five months of this calendar year 2012 (up to June 9), Mukherjee said, adding that this was the highest net FII inflow in the corresponding periods of the last five years.
India is currently rated 'BBB-' with a negative outlook by the rating agency. The 'BBB-' rating is considered lowest investment grade by market participants and is one notch above speculative grade. India has the lowest S&P rating of all the BRIC countries, also consisting of China, Russia and Brazil.