India Skirts Downgrade by Moody’s as Outlook Changed to Stable
(Bloomberg) -- The outlook on India’s credit rating was raised to stable from negative by Moody’s Investors Service, ending the threat of a downgrade for Asia’s third-largest economy.
The credit score was kept at Baa3, still at the lowest investment grade. That’s on par with Russia and Romania.
“The downside risks from negative feedback between the real economy and financial system are receding,” Moody’s said in a statement Tuesday. “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.”
Previously, S&P Global Ratings said it expected no change to India’s sovereign rating over the next two years, despite risks to the economic growth from the Covid-19 crisis. That leaves Fitch Ratings as the only firm to have a negative outlook on the economy, citing risks from rising public debt.
While risks stemming from a high debt burden and weak debt affordability remain, Moody’s said it expects that the economic environment will allow for a gradual reduction of the general government fiscal deficit over the next few years.
India’s economy is forecast to expand at the fastest pace among major economies in the year to March 2022, as risks of another wave of Covid-19 infections recede and the inoculation drive gathers pace. The central bank has kept monetary policy easy despite stubborn inflationary pressures to support a durable economic recovery.
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