Wednesday, October 10, 2012

S&P warning, slashing car industry... what's in store India Inc.?

Economic reforms have no wonder provided respite to India’s downgrading economy. The couple of reforms introduced in September saw both the indices of the Indian bourses exhibiting a positive uptrend momentum. But Standard & Poor rating agency’s warnings seem to dampen the spirits of investors. According to the credit rating agency, within the next two years, India still faced a one-in-three chance of a credit rating downgrade. The warning will turn true if the bad political climate further worsens, if fiscal reforms are sluggishly implemented, if external position declines, and if growth prospects go dim.

To add to the downgrade scenario is the once-booming car industry growing just 1 percent to 3 percent in the current fiscal year. In March 2011 fiscal, India saw car sales growing more than 20 percent. Slow economic growth rate and high interest rates are the principal causes of the slashed car sales growth. Until the economy comes back to momentum, this slashing trend may well continue.

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