Rating agency Standard and Poor on Thursday affirmed India’s sovereign rating of 'BBB-'and maintained a “stable”outlook.

“Despite a notable deceleration in India's economy in recent quarters, we believe its structural growth outperformance remains intact. Real Gross Domestic (GDP) growth is therefore likely to gradually recover in the longer-run, may be over the next two to three years”, S&P said in a statement.

“Nevertheless, India's fiscal position remains precarious, with elevated fiscal deficits and net government indebtedness. “Fiscal deficits have exceeded the government's plan, and we expect limited consolidation over the next few years,” the rating agency added.

The ratings on India reflect the country's above-average real GDP growth, sound external profile, and evolving monetary settings.

India's strong democratic institutions promote policy stability and compromise, and also underpin the ratings.

These strengths are balanced against vulnerabilities stemming from the country's low per capita income and consistently elevated fiscal deficits that contribute to high general government debt, net of liquid assets.

Upward pressure on the ratings could build if the government significantly curtails its fiscal deficits, resulting in lower net indebtedness at the general government level.

Upside potential on the ratings could also increase if India's external accounts strengthen substantially.

Downward pressure on the ratings could emerge if: India's GDP growth falls well below the forecasts, leading to reassess view of growth trend. The further rise in net general government deficits from their currently elevated levels and political developments that materially undermine economic reform momentum would also trigger downward pressure in ratings.