Sovereign bonds slid after the report, with the yield on the benchmark 10-year note rising 5 basis points to 6.76 per cent.
The rating company said it expects the economy to gradually recover over the next few years with correspondingly higher growth.
”If this recovery does not materialize, and it becomes clear that India’s structural growth has significantly deteriorated, we could lower the rating,” Andrew Wood, a Singapore-based analyst at S&P, said in the statement.
Economic growth is at the lowest since Prime Minister Narendra Modi came to power for the first time in 2014. The economy expanded 4.5 per cent in July-September, slowing for a sixth straight quarter as fall in local consumption, troubled banks and a weak global outlook took their toll.
S&P rates India at BBB-, which is the lowest investment-grade rating. Moody’s Investors Service downgraded India’s outlook to negative from stable in November though it rates the country a notch higher than S&P.