[ad_1]
Moody’s Investors Service on Tuesday changed the outlook on India’s sovereign ratings to stable from negative. However, it retained the ratings, both of foreign and domestic currencies, at the lowest investment grade.
“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,” said Moody’s.
With this, two ratings agencies — Moody’s and Standard & Poor’s — have a stable outlook on their ratings on India, while Fitch has negative outlook. All three rating agencies have given India the lowest investment grade.
Moody’s said 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.
In Moody’s lexicon, India has Baa3 ratings. It said retaining of the ratings balances India’s key credit
strengths, which include a large and diversified economy with high growth potential, a relatively strong external position, and a stable domestic financing base for government debt, against its principal credit
challenges, including low per capita incomes, high general government debt, low debt affordability and more limited government effectiveness.
India’s long-term local-currency (LC) bond ceiling remains unchanged at A2 and its long-term foreign-currency (FC) bond ceiling remains unchanged at A3.
The four-notch gap between the LC ceiling and issuer rating reflects limited political event risk that would significantly disrupt the economy and modest external imbalances, balanced by a large government footprint in the economy and limited predictability and reliability of government policies.
The one-notch gap between the LC and FC ceiling reflects limited external indebtedness and that, despite a
history of several forms of capital controls, a debt moratorium remains unlikely.
Dear Reader,
Business Standard has always strived hard to provide up-to-date information and commentary on developments that are of interest to you and have wider political and economic implications for the country and the world. Your encouragement and constant feedback on how to improve our offering have only made our resolve and commitment to these ideals stronger. Even during these difficult times arising out of Covid-19, we continue to remain committed to keeping you informed and updated with credible news, authoritative views and incisive commentary on topical issues of relevance.
We, however, have a request.
As we battle the economic impact of the pandemic, we need your support even more, so that we can continue to offer you more quality content. Our subscription model has seen an encouraging response from many of you, who have subscribed to our online content. More subscription to our online content can only help us achieve the goals of offering you even better and more relevant content. We believe in free, fair and credible journalism. Your support through more subscriptions can help us practise the journalism to which we are committed.
Support quality journalism and subscribe to Business Standard.
Digital Editor
[ad_2]
Source link
