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'Standard & Poor's cut its outlook on India's long-term debt to negative and warned of a possible credit downgrade, a surprise move that challenges the nation's image as a surging economic force.'

'S&P highlighted what it said was political gridlock that will prevent the Congress party-led government of Prime Minister Manmohan Singh from carrying out reforms to rein in its fiscal deficit. The party, hobbled by scandals and infighting in its coalition, has been unable to push through changes that would attract fresh investment, increase productivity and curtail spending on welfare and subsidies.

S&P maintained India's credit rating at triple-B-minus, the lowest investment-grade rating, but said there was a one-in-three chance that it could be downgraded to "junk" status over the next two years "if the external position continues to deteriorate, growth prospects diminish, or progress on fiscal reforms remains slow in a weakened political setting." '

'Moody's and Fitch, the other major ratings firms, have also assigned India their lowest investment-grade ratings, but haven't joined S&P in its negative outlook. Moody's said last week it saw no immediate threat to India's rating.'

Best was this comment by the Commerce Secretary:

'Commerce Secretary Rahul Khullar said in an interview on Wednesday that India faces a huge challenge securing the tens of billions of dollars in foreign capital it needs to finance its current-account gap. He said European banks that have traditionally financed Indian debt could cut back lending amid the Continent's economic woes, raising pressure on India to attract other foreign capital.

"That's the real problem," Mr. Khullar said. "Where is the capital going to come from?" '

I guess it's also the Europeans' fault that his government can't get anything done?
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