Standard and Poor's has cut India's credit rating outlook from stable to negative, citing the country's slowing economic growth and widening deficit.

The U.S. ratings agency on Wednesday maintained India's credit rating at BBB-, the lowest investment grade rating. But it said India has a one in three likelihood of a downgrade if growth prospects diminish or progress on fiscal reforms remains slow under weak political leadership.

Last week, India's Central Bank cut interest rates for the first time in three years, after India's growth fell to less than 7 percent in 2011 from nearly 9 percent the year before.

The country's fiscal deficit swelled to 5.9 percent of gross domestic product in the fiscal year that ended in March, far above the government's 4.6 percent target. The growth in the deficit was due to higher food and fuel subsidies and higher spending on rural welfare programs.

Indian Finance Minister Pranab Mukherjee on Wednesday tried to reassure investors about the S&P downgrade and said the government would “overcome these difficulties.”

“I do not feel panicky, I am concerned, but I do not feel panicky because I am confident that our economy will grow at around 7 percent plus. We will be able to control fiscal deficit and it will be around 5.1 (percent).''

Asia's third-largest economy has been battling high inflation driven by food and fuel prices.

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