Time to act, not panic

Finance minister Pranab Mukherjee is obviously right when he says there is no reason to panic about S&P lowering its outlook on India to negative from stable while keeping the rating at BBB- (S&P says there’s a 1-in-3 chance of a downgrade if things don’t get better). The government has little external debt, forex flows don’t really depend upon country ratings and, as was pointed out by most analysts, there is little new economic news that S&P is reacting to. Indeed, as our columnist Madan Sabnavis points out (Indian fundamentals stable), economic growth appears to be picking up, the current account deficit is largely the way it is due to excessive imports of gold and, despite the high fiscal deficit, RBI has ensured adequate liquidity and there are few signs of local investors being crowded out by higher government-spend.

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