S&P downgrades India's credit outlook to negative

Adding to its discomfort, Moody's Analytics, a wing of global rating agency Moody's, said India is growing below its potential as politics was weighing on the economy with its national government acting as the "single biggest drag" on business activity.

Unfazed by these comments, Finance Minister Pranab Mukhejree said the government was not feeling panicky but it was concerned and will take note of the "timely warning".

However, the Opposition latched on to the ratings and attacked the government saying it was solely responsible for the "policy paralysis" of the last few years.

Reflecting deep-seated problems facing the economy, Standard & Poor's cut India's credit rating outlook to negative from stable.

Warning of a downgrade if country's fiscal situation does not improve, S&P restated the country's long term rating of BBB-, just a notch above junk, sending stocks and rupee lower.

India's outlook is still underachieving and poor management has dragged economic growth to below potential, Moody's Analytics Senior Economist Glenn Levine said.

The Congress' first family -- Sonia Gandhi and Rahul Gandhi -- also came under criticism from Levine who said they "blew their chance" to restart the legislative process.