Standard & Poor's Ratings Services on Wednesday affirmed its BB foreign currency and BB+ local currency, long-term sovereign credit ratings on India.
The outlook continues to remain negative.
"The ratings remain constrained by high public debt and serious fiscal inflexibility," Takahira Ogawa, Standard & Poor's director of sovereign ratings in Asia-Pacific, said.
"The consolidated debt of the central and state governments is expected to hover around 80 per cent of gross domestic product this year, and interest payments alone are likely to consume nearly half of central government revenue," he added.
The negative outlook on the ratings reflects concerns that the long-term trajectory of the government's debt burden may continue to worsen even as the economy grows at about 5 per cent per year and foreign exchange reserves remain high.
The recent passage of legislation to strengthen the stock market regulator and bolster competition by amending archaic anti-monopoly laws augurs well for long-term growth prospects as does the government's renewed commitment to privatisation.
Similarly, the passage of the Securitisation and Reconstruction of Financial Assets Act should bolster creditor rights and, if complemented with other steps to increase the commercial orientation of public sector banks, improve the quality of bank lending in the coming years, the agency said.
"These developments, while encouraging, may not staunch the erosion of the government's own finances in the near term," Ogawa said.
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