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The Impact of Standard & Poor’s Credit Rating on Indian Economy


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1 Asmara College of Health Sciences, Asmara, Eritrea, N.E. Africa
     

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Standard and Poor‘s (S&P) has warned that India could lose its investment grade credit rating. In a report titled Will India Be the First BRIC Fallen Angel? the agency said: ―Slowing GDP growth and political roadblocks to economic policymaking could put India at risk of losing its investment-grade rating.‖ The agency revised its outlook on India‘s BBB-long-term sovereign credit rating to negative from stable. What this means is that India runs the risk of losing its investment grade credit rating and being rated as speculative or junk. Let us try and understand what this really means for India. One clear impact will be foreign investors who are not allowed to invest in non-investment grade securities will stay away from India. This would mean that pension funds and other longterm funds will stay away from India. It could also mean that if foreign investors with positions in India start exiting, the stock market might go down in the days to come. The present paper discusses the following objectives:  The Conceptual underpinnings of Standard & Poor‘s credit rating.  The Impact of Credit Rating on World Economy.  The Impact of S&P‘s credit rating on Indian Economy.

Keywords

Standard & Poor‘s, Credit Rating, BBB- and Indian Economy.
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  • Baker, Kent H. and Sattar A. Mansi, 2002: "Assessing Credit Rating Agencies by Bond Issuers and Institutional Investors". Journal of Business Finance and Accounting, 29 (9/10): 1367-1398.
  • Beaver, William H., Catherine Shakespeare, and Mark T. Soliman, 2006: "Differential Properties in the Ratings of Certified vs. Non-Certified Bond Rating Agencies". Journal of Accounting and Economics, 42 (3): 303-334.
  • Blaurock, Uwe, 2006: "Control and Responsibility of Credit Rating Agencies - General Report". XVIIth Congress of the International Academy of Comparative Law Utrecht, 16 – 22 July 2006: http://www2.law.uu.nl/priv/AIDC/index1.asp
  • Federal Reserve Board, 2005: "Banking Agencies Announce Revised Plan for Implementation of Basle II Framework". Press Release (September 30, 2005):
  • www.en.wikipedia.org/wiki/Credit_rating
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  • The Impact of Standard & Poor’s Credit Rating on Indian Economy

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Authors

Srinivasa Rao. Mudigonda
Asmara College of Health Sciences, Asmara, Eritrea, N.E. Africa

Abstract


Standard and Poor‘s (S&P) has warned that India could lose its investment grade credit rating. In a report titled Will India Be the First BRIC Fallen Angel? the agency said: ―Slowing GDP growth and political roadblocks to economic policymaking could put India at risk of losing its investment-grade rating.‖ The agency revised its outlook on India‘s BBB-long-term sovereign credit rating to negative from stable. What this means is that India runs the risk of losing its investment grade credit rating and being rated as speculative or junk. Let us try and understand what this really means for India. One clear impact will be foreign investors who are not allowed to invest in non-investment grade securities will stay away from India. This would mean that pension funds and other longterm funds will stay away from India. It could also mean that if foreign investors with positions in India start exiting, the stock market might go down in the days to come. The present paper discusses the following objectives:  The Conceptual underpinnings of Standard & Poor‘s credit rating.  The Impact of Credit Rating on World Economy.  The Impact of S&P‘s credit rating on Indian Economy.

Keywords


Standard & Poor‘s, Credit Rating, BBB- and Indian Economy.

References