The spate of bad news continues. The leading ratings agency Moody’s has lowered India’s rating from Stable to Negative. This indicates that India's fiscal position has deteriorated to a level that is unsustainable in the medium term.

As per the rating agency, there are many reasons for this. India's contingent liabilities are also high. The country's public sector, including the electricity sector, is generally inefficient. High Fiscal Deficit because of election oriented populist measures is also ne of the factors.

S&P expects general government deficit, including off-budget measures such as oil and fertilizer bonds, to increase to 11.4% in the fiscal year ending March 31, 2009, from 5.7% in the previous fiscal year. It also said that the deficit will remain high at 11.1% in FY10. Fiscal deficit could widen if next government announces another stimulus package, it added.

S&P affirming BBB- ratings to India is a bad news. The rating has not gone down and is still investment grade but has already come down in terms of outlook to negative and is a shorter step to be downgraded.