S&P has reaffirmed the double-B foreign currency and triple-B local currency long-term issuer credit rating, and the single-B foreign currency and the `A-3' local currency short-term issuer credit rating for the country, an agency release issued in London said.

"The affirmation reflects the fact that India's reliance on weak coalition Governments is factored in at current ratingts levels. Frequent changes of Government are the inevitable consequence of the fragmentation of India's voting patterns in recent years, the long-term decline of theonce-dominant Congress party, and the heightened assertivaness of regional political groups," the release said adding that the fall of the Vajpayee adminsitraetion last Saturday is consistant with the ratings' assumptions and does not, in itself, materially affect India's creditworthiness.

Listing out the factors constraining India's ratings, S&P said put the limited prospects for meaningful fiscal adjustment as the biggest constraint.

"The consolidated budget deficit is expected to remain at about 8 per cent of GDP per year; in the medium term, this could push the general government debt stock (including debt covered by state-level guarantees) to more than 70 per cent of GDP and interest payments to 50 per cent of central government budgetary revenue, threatening long term debt sustainability. Government and public enterprise financing requirements could absorb up to 40 per cent of domestic savings, crowding-out private sector borrowing activity, lowering India's overall return on investment evenfurther, and thereby dimming growth prospects," the release said.

According to the rating agency, protectionism and vulnerability to terms-of-trade shocks, is the second biggest factor constraining India's ratings.

"The continued existence of a complex regime of quantitative controls on imports, combined with import-tariff increases in recent years, has thwarted greater openness in the economy, preserved trade protection, eroded export prospects, and distorted investment patterns in favour of inward-looking sectors. The deceleration of export growth rates to minimal levels damages the government's external debt-service capacity, constrains investor confidence and GDP growth, and augurs external imbalances. Over one-quarter of India's merchandise imports consist of petroleum and petroluem products; a sustained increase in world oil prices could accelerate external borrowing and raise total external indebtedness above the already-high 180 per cent of exports," the S&P release stated.

The global ratingagency feels that India's ratings are supported by ongoing regulatory and structural reforms in other sectors, as well as prudent international liquidity management. "To some extent, economic policy is shielded from the vagaries of coalition political by the long-term economic and financial imperatives of market based liberalisation. Official foreign exchange reserves covered about 165 per cent of total government, public sector, and private sector external pricnipal-repayment obligations due within the next 12 months. At $32.6 billion on April 7, they mitigate the risk of a sudden loss of external confidence even as expects decelerate and the trade gap widens," S&P release added.

The release also said that greater fiscal rigor, large-scale privatization, and a commitment to trade liberalisation would support an improvement in India's ratings going forward. This, along with more welcoming policies for export-oriented foreign direct investment, could stimulate growth prospects and otherwise debt wouldsustainability.

"However, the required import tariff reform would necessitate an even deeper fiscal adjustment as yet not forthcoming from policy makers-- through downsizing the administration, reducing subsidies, and improving cost recovery in public services," Standard & Poor's said.