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MUMBAI: Ratings agency Standard & Poor’s on Wednesday cut India’s outlook to negative from stable, citing its large fiscal deficit and expectations of only modest progress on reforms given political constraints, battering stocks, bonds and the rupee.

The lowered outlook jeopardises India’s long-term rating of BBB-, which is the lowest investment grade rating.

"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," S&P credit analyst Takahira Ogawa said in a note.

India’s 10-year bond yield rose 4 basis points to 8.63 per cent, while the rupee weakened to 52.64 against the dollar from 52.48 before the action.

Stocks were also hit, with the main BSE index down 0.9 per cent.

India’s fiscal deficit swelled to an expected 5.9 per cent of GDP in the fiscal year that ended in March, far above the government’s 4.6 per cent target.

Many economists believe New Delhi will have a tough time hitting its target of cutting the deficit in the current fiscal year to 5.1 per cent of GDP, given a hefty subsidy burden and a weakened government that has failed to push through significant reforms.

General elections looming in 2014 are expected to limit the prospects for significant reforms that would improve the investment climate and India’s fiscal position.

"The writing was on the wall given the country’s weakening debt profile and sluggish investment climate," said Radhika Rao, economist at Forecast Pte in Singapore.

"With the coveted investment grade now at risk, one can only hope this acts as a wake-up call for the government," she said.

Moody’s has a Baa3 rating on India, while Fitch rates India BBB-. Both are also the minimum investment grade ratings. Moody’s in December issued a stable outlook for India.

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WASHINGTON: The lack of US condemnation of India’s latest missile test demonstrates that the Washington appreciates India’s need to meet the emerging strategic challenge posed by rising China, according to two US scholars.
 
It also shows "US is comfortable with Indian progress in the nuclear and missile fields", Lisa Curtis, senior research fellow for South Asia, and Baker Spring, research fellow in National Security Policy, at The Heritage Foundation, a conservative thinktank said in a commentary.
 
"India’s successful test of the Agni-V, a nuclear-capable long-range missile, is a major step forward for New Delhi in attaining nuclear deterrence against regional rival China," they said calling it as "telling that no country has criticised India’s missile test."
 
Curtis and Spring also noted that the US State Department simply called on all nuclear-capable states to exercise restraint and underlined India’s solid record on non-proliferation and its cooperation with the international community on nuclear issues.
 
"This is a far cry from Washington’s position on Indian ballistic missile development throughout the 1990s, when Washington pressured New Delhi to modify its nuclear and missile posture," they said suggesting "the new US stance also demonstrates a welcome evolution in US non-proliferation policy."
 
"The US change in position with regard to Indian missile capabilities demonstrates how far the US-India relationship has evolved over the last decade," Curtis and Spring said.
 
"Now the US views India as a strategic partner with growing economic and political clout that will contribute to promoting security and stability in Asia."

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A sugarcane farmer Shekar hanged himself on Saturday as his produce, to be shipped to a sugar factory in Nanjangud, was withering away in the summer heat. Angry locals smuggled Shekar’s body out of the village on a two-wheeler. It was only after officials of the Bannari Amman Sugar Factory agreed to pay Rs 4 lakh as compensation that they relented and allowed the body to be shifted for postmortem. At Surgur, they attacked a sub-office attached to the factory, and manhandled a senior police official.