India calls US downgrade 'grave'

NEW DELHI: The loss by the United States of its top-rank AAA credit rating from Standard & Poor's has created a "grave" situation, India's finance minister said on Saturday.

"We will have to analyse it (the downgrade). It will require some time," Finance Minister Pranab Mukherjee told reporters in New Delhi.

"The situation is grave," he said.

Standard & Poor's cut the US credit rating for the first time in history on Friday, saying US politicians were increasingly unable to come to grips with the country's huge fiscal deficit and debt load.

The Indian finance minister's statement came after Indian shares hit a 13-month intraday low on Friday on the back of US economic worries and the European debt crisis.

India's market regulator, the Securities and Exchange Board of India (SEBI), has urged investors in the country's market to stay calm despite the sharp fall and said it was "closely watching the situation."

Earlier in the week, a top Indian government advisory panel cut the growth forecast for Asia's third-largest economy from nine percent to 8.2 percent, citing the impact of a string of interest rate hikes and global uncertainty.

The country weathered the 2008 global financial crisis, helped by its still mainly inward-looking economy and substantial fiscal stimulus.

But now India's economy is already slowing and it is contending with near double-digit inflation as the global financial system faces renewed turmoil.

Copyright AFP (Agence France-Presse), 2011