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India: S&P cuts growth forecast, despite Singh's new reforms

S&P cut its growth forecast to 5.5% from 6.5% for the financial year ending in March, despite PM's moves to loosen rules on foreign investment.
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A man makes chapatis as an Air India passenger jet flies over the Jari Mari slum in Mumbai, India. (Daniel Berehulak/Getty Images)

Ratings agency Standard & Poor's lowered its growth forecast for the India economy to 5.5 percent from 6.5 percent for the year ending March 31, despite the prime minister's recent moves to attract capital by opening the aviation and retail sectors to greater foreign investment.

According to, S&P had cut its outlook on India's sovereign rating of `BBB-' to negative from stable in April, while it has also lowered its growth forecast for China to 7.5 percent.

Prime Minister Manmohan Singh looks poised to take further measures to boost the economy, however, the Times of India reports.

Following moves to allow foreign airlines to invest up to 49 percent in local ventures and to allow multi-brand retailers like Walmart to invest up to 51 percent in local stores, Singh is readying a plan to loosen banking restrictions to allow banks to loan more money to real estate firms -- in a bid to boost the employment-generating construction sector. Educational loans are also reportedly going to get easier, the paper said.

Meanwhile, the government is likely to announce an increase in the cap on foreign investment in the insurance sector to allow foreign players to buy up to 49 percent in local ventures, rather than today's limit of 26 percent, Zee News reports.

Enough to send the growth forecasts back in the other direction? Maybe not, given the state of the world's economy.