Finance minister Pranab Mukherjee on Saturday described the downgrading of the US government's credit rating from triple A to double A on Friday as a grave situation. But he said, “I am not unnecessarily worried, there is no point in pressing the panic button”.
Indian industry captains, too, did not seem to be overly concerned over the situation.
“There is no reason to worry. It would not have too much impact on the (Indian) economy,” Adi Godrej, chairman of Godrej Group and president designate of CII, told reporters on the sidelines of a CII function.
On Friday, credit rating agency Standard and Poor's, or S&P as it is better known, downgraded the US as a long-term borrower — for the first time in US history — saying the deal on raising the government’s debt ceiling earlier this week did not quite make the cut.
Earlier, S&P said the debt limit must be raised and the long-term deficit must be reduced by $4 trillion over the next decade, while the deal cut the debt by $ 2.1 trillion.
S&P is the last of the three credit agencies whose rating was widely awaited as a mark of approval - or disapproval - of the deal. The two others —Moody's and Fitch — had retained their triple-A ratings.
The downgrade announcement came on a day of mixed tidings for the US and President Barack Obama, a day after he turned 50. It started badly as the market kept on its downward spiral, then picked up on the jobs announcement. S&P dropped the bomb, after hours of rumours, just as the markets closed.
The credit agency's issues were essentially two: the debt deal of a $2.1 trillion cut falls way short of the required amount and the preceding controversy showed the chances of reducing public spending would remain contentious.
But it saw the main problem thus: “The political brinksmanship of recent months highlights what we see as America's governance and policymaking becoming less stable, less effective, and less predictable than what we previously believed.”
The deal was signed hours ahead of the deadline of August 2 for the US to start defaulting on its financial borrowings.