The outlook on the Indian government’s ratings was recently changed from negative to stable by Moody’s Investors Service, and the nation’s foreign and local currency long-term issuer ratings as well as the local currency senior unsecured rating were all confirmed at Baa3. The other short-term local currency rating for India was also confirmed by Moody’s to be P-3.
According to a press release from the company, Moody’s believes that the downside risks resulting from unfavorable feedback between the financial system and the actual economy are decreasing.
Banks and non-bank financial entities are substantially less risky to the sovereign than Moody’s initially thought because of their stronger capital buffers and increased liquidity.
The outlook on the Indian government’s ratings was recently changed from negative to stable by the international rating agency Moody’s Investors Service, which also confirmed the nation’s Baa3 local-currency senior unsecured rating and long-term issuer ratings in both foreign and local currencies. The other short-term local currency rating for India was also confirmed by Moody’s to be P-3.
In addition, Moody’s expects that the economic climate will permit a gradual reduction of the general government fiscal deficit over the next few years, preventing further deterioration of the sovereign credit profile, even though risks resulting from a high debt burden and weak debt affordability remain.
The affirmation of the Baa3 ratings strikes a balance between India’s primary credit challenges—low per capita incomes, high general government debt, low debt affordability, and less effective government—and its key credit strengths—a large, diversified economy with high growth potential, a relatively strong external position, and a stable domestic financing base for government debt.
Both the long-term local currency (LC) and long-term foreign currency (FC) ceilings for India remain at A2 and A3, respectively.
If the government’s economic and financial sector reforms were successfully implemented and led to a sizable and sustained rise in private sector investment, India’s economic growth potential would likely exceed Moody’s predictions.
The credit profile would also be supported by the efficient implementation of fiscal policy measures that led to a consistent decrease in the government’s debt burden and improvements in debt affordability.
Newspaper Fibre2Fashion Desk (DS)