Moody’s upgrades outlook on India from ‘negative’ to ‘stable’

Last Updated on December 19, 2022 by Admin

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Moody’s Investors Service recently changed the outlook on the Indian government’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. Moody’s also affirmed India’s other short-term local currency rating at P-3.

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 company said in a press release.

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.

Global rating agency Moody’s Investors Service recently changed the outlook on the Indian government’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. Moody’s also affirmed India’s other short-term local currency rating at P-3.

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 said.

The affirmation of the Baa3 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.

Moody’s could upgrade the ratings if India’s economic growth potential increased materially beyond its expectations, supported by effective implementation of government economic and financial sector reforms that resulted in a significant and sustained pickup in private sector investment.

Effective implementation of fiscal policy measures that resulted in a sustained decline in the government’s debt burden and improvements in debt affordability would also provide support to the credit profile.

Fibre2Fashion News Desk (DS)



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