Rating agency Moody’s on Tuesday revised India’s rating outlook to stable from the negative ranking earlier. It also affirmed India’s Baa3 rating. The decision to change the outlook to stable reflects Moody’s view that the downside risks from negative feedback between the real economy and financial system are receding, the agency said.
Moody’s Investors Service had last year downgraded India’s sovereign rating to ‘Baa3’ — which is the lowest investment grade, just a notch above junk status — from ‘Baa2’, saying there will be challenges in the implementation of policies to mitigate risks of a sustained period of low growth and deteriorating fiscal position.
“Moody’s Investors Service has today changed the outlook on the Government of India’s ratings to stable from negative and affirmed the country’s foreign-currency and local-currency long-term issuer ratings and the local-currency senior unsecured rating at Baa3,” it said in a statement.
“With higher capital cushions and greater liquidity, banks and non-bank financial institutions pose much lesser risk to the sovereign than Moody’s previously anticipated. “And while risks stemming from a high debt burden and weak debt affordability remain, Moody’s expects that the economic environment will allow for a gradual reduction of the general government fiscal deficit over the next few years, preventing further deterioration of the sovereign credit profile,” it added.
India’s economy took an upward trajectory of GDP growth in the June 2021 quarter and also the fiscal deficit and borrowing numbers.
The Centre’s fiscal deficit in the April-July 2021 period came in at only 21.3 per cent of full-year budget estimate (BE), mainly on account of curbs on expenditure and a rise in tax and non-tax revenue collection. In the same period last fiscal, the deficit was 103 per cent of the annual target. In line with its Budget estimates, the Centre has announced it would borrow Rs 5.03 lakh crore in the October-March period. The government had pegged its gross borrowing target for current fiscal at Rs 12.5 lakh crore in the 2021-22 Budget.
The Indian economy contracted 7.3 per cent in the 2020-21 fiscal. In the April-June quarter of current fiscal, the economy grew 20.1 per cent. Moody’s has projected a 9.3 per cent growth in the current fiscal ending March 2022. For the calendar year 2021, Moody’s has cut growth estimate sharply to 9.6 per cent.
(With PTI inputs)
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