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S&P sees no India review due to drought

The worst drought in more than a decade is unlikely to lead to a downgrade of India's sovereign ratings by Standard and Poor's, The Financial Express reported on Saturday.

"I do not think that the drought-like situation will lead to a country-rating downgrade or a review," Edward Z Emmer, executive managing director for corporate ratings told the newspaper.

S&P downgraded India's long-term local currency rating to BBB-minus from BBB last August and said the outlook for its local and foreign currency ratings was negative, meaning they could be lowered further.

India's long-term foreign currency ratings have been unchanged since October 1998 when S&P downgraded then to BB from BB-plus. Most foreign investors cannot invest funds into countries which are rated below BBB.

The newspaper said a team led by John Beers, head of S&P's sovereign rating unit, would be visiting the country later in the year.

A couple of research houses have cut India's economic growth estimate for the current financial year citing lower farm output as the main concern as a drought gripped 12 grain-bowl states in the north and west of the country.

Earlier in the week, India said rainfall, crucial to the economy, was 30 per cent lower than normal across the country during the first two months of the monsoon season.

The Indian economy is heavily dependent on agriculture, which employs 70 per cent of its one billion population and is crucial to consumer demand. It also contributes a quarter of the GDP.

Finance Minister Jaswant Singh said India is expected to grow at 5.5 per cent this financial year, which is below the central bank's growth estimate of 6.0-6.5 per cent.

Ironically, northeastern parts of India have been ravaged by monsoon floods, as have neighbouring Nepal and Bangladesh.

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