The Economic Times
English EditionEnglish Editionहिन्दीગુજરાતી
| E-Paper
Search
+

    Moody's downgrades India's ratings to Baa3, maintains negative outlook

    Synopsis

    The ratings agency said India faces a prolonged period of slower growth.

    Moody's downgrades India's sovereign rating to 'Baa3', maintains negative outlook
    Mumbai: Moody's Investors Service on Monday downgraded India's foreign currency and local currency long-term issuer ratings to Baa3 from Baa2, citing the country's policymaking institutions will be challenged in enacting and implementing policies which effectively mitigate the risks of a sustained period of relatively low growth.

    “The decision to downgrade India's ratings reflects Moody's view that the country's policymaking institutions will be challenged in enacting and implementing policies which effectively mitigate the risks of a sustained period of relatively low growth, significant further deterioration in the general government fiscal position and stress in the financial sector,” the ratings agency said in a release, while maintaining a negative outlook.

    It has also downgraded India's local currency senior unsecured rating to Baa3 from Baa2, and its short-term local-currency rating to P-3 from P-2.

    The negative outlook reflects dominant and mutually-reinforcing downside risks from deeper stresses in the economy and financial system that could lead to a more severe and prolonged erosion in fiscal strength than Moody's currently projects.

    Moody's also lowered India's long-term foreign-currency bond and bank deposit ceilings to Baa2 and Baa3, from Baa1 and Baa2, respectively.

    The ratings agency said India faces a prolonged period of slower growth relative to the country's potential, rising debt, further weakening of debt affordability and persistent stress in parts of the financial system, all of which the country's policymaking institutions will be challenged to mitigate and contain.

    Moody's said its upgrade of India's ratings to Baa2 in November 2017 was based on the expectation that effective implementation of key reforms would strengthen the sovereign's credit profile through a gradual but persistent improvement in economic, institutional and fiscal strength.

    “Since then, implementation of these reforms has been relatively weak and has not resulted in material credit improvements, indicating limited policy effectiveness,” the ratings agency said.

    “While today's action is taken in the context of the coronavirus pandemic, it was not be driven by the impact of the pandemic. Rather, the pandemic amplifies vulnerabilities in India's credit profile that were present and building prior to the shock, and which motivated the assignment of a negative outlook last year,” it added.

    The short-term foreign-currency bond ceiling remains unchanged at Prime-2, and the short-term foreign-currency bank deposit ceiling was lowered to Prime-3 from Prime-2. The long-term local currency bond and bank deposit ceilings were lowered to A2 from A1.
    (What's moving Sensex and Nifty Track latest market news, stock tips and expert advice on ETMarkets. Also, ETMarkets.com is now on Telegram. For fastest news alerts on financial markets, investment strategies and stocks alerts, subscribe to our Telegram feeds.)

    Also Read

    145 Comments on this Story

    Sp Shende39 days ago
    no one can predict future. evenef Moody. It rating may false.
    Dinesh Singh39 days ago
    Rating agencies are full of vested interests manipulating ratings tomeet their interests. Not reliable at all!
    Sanjay Choudhury39 days ago
    At present situation not to think about Rating houses. If we think about our conventional resources,we can achieve the target,by giving proper management in these fields.
    Rating houses know very well what is our low pet capita income.
    Government Declare low pet capita income range between 6 to 18 lakh.
    This is just a rediculus.
    Such type of comments,Rating houses
    got the fakenes, of government.
    India knows very tough time to grow
    with our conventional resources.
    Only tight policy, by which we can reach to our goal. Rating is no problems.
    We have to go in right way.
    Our expenditure will be in right way.
    The Economic Times