Standard & Poor's Ratings Services may lower the rating in the next year or so if the new government proves unable to reverse India's low economic growth.

However, it could revise the outlook to stable if the administration can restore some of India's lost growth potential and consolidate its fiscal accounts.

The budget has no immediate impact on the sovereign credit rating on India (unsolicited rating BBB-/Negative/A-3), it said in a report released post Budget.

S&P said the commitment of the new Indian government to maintaining the trend of fiscal consolidation would benefit the sovereign's credit fundamentals. However, the budget announced has opted for a cautious approach toward tackling some of the economy's structural weaknesses.

The budget for fiscal 2015 (ending March 31, 2015) aims to cut the central government deficit to 4.1% of GDP, and to 3.6% of GDP in the following two years, from 4.6% in fiscal 2014. India's high fiscal deficit and resultant debt stock of about 70% of GDP are two of the main constraints on the sovereign rating.

"It is unclear how the government will offset revenue loss from tax cuts and raising the income-tax exemption threshold proposed in the budget on the expenditure side," said Agost Benard, credit analyst, S&P.

On the revenue side, receipts in the proposed budget are boosted by a near 8% year-on-year rise in capital receipts, inflows that are of a one-off nature and we therefore don't consider as part of government revenue.

Moreover, it is uncertain whether the goods and services tax, a key component of simplifying the tax structure and raising revenues, will be approved by the end of this year as the finance minister stated.

"The budget is less ambitious in reducing the subsidy burden," Benard said. "It promises better targeting of food and petroleum subsides. However, it is not yet clear how that will be achieved, or how much saving it would bring."

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