DURING Palaniappan Chidambaram’s second stint as India’s finance minister, in January 2007, India had the satisfaction of getting a credit-rating upgrade. After a bout of fast growth and encouraging noises from the government about its finances, Standard & Poor’s (S&P) boosted India’s rating to BBB-, the lowest rung of investment grade. Today, on his third stint running the ministry of broken dreams, Mr Chidambaram must stop a lurch back to “junk” status. Both S&P and Fitch warned earlier this year that they might lower India’s score given slow growth, a lack of reform and high borrowing. On October 10th, S&P reiterated there was at least a one-in-three chance of a downgrade. (Moody’s, a third agency, is less grumpy.)

A downgrade would not in itself cause a crisis. The government-bond market is dominated by local banks and insurance firms which are forced to buy thanks to liquidity and solvency rules. They will hoover up bonds, whatever their rating. The central bank is buying freely, too. It owns 18% of all government bonds, almost double the level of two years ago. Indian firms are perfectly capable of operating abroad if a downgrade happens. Tata Sons’ takeover of Corus, a British steel firm, was plotted when S&P rated India “junk”.

Still, an investment-grade rating is handy if, like India, you run a current-account deficit and hope to attract foreigners to help finance your vast infrastructure needs over the next decade. In September the government announced a batch of reforms designed to shore up confidence, for example by relaxing rules for foreign supermarkets. Mr Chidambaram, who took up his post in August, has tried to maintain momentum by, among other things, hinting he will reverse a retroactive tax on Vodafone, a telecoms firm. Tim Geithner, America’s treasury secretary, gamely hailed the changes as “very significant”.