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Moody's cuts India's credit ratings outlook to negative

08 Nov '19

2 min read

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Citing a growing debt burden and the government’s struggle to narrow the budget deficit, Moody’s Investors Service has cut India’s credit ratings outlook to negative from stable over concerns that stunted economic growth cannot be helped. New Delhi responded by saying that the economwy’s fundamentals are robust with inflation under check and bond yields low.

The rating company affirmed the nation’s foreign issuer rating at Baa2, the second-lowest investment grade score.

“India continues to offer strong prospects of growth in near and medium term,” the Indian ministry of finance said in a press release responding to the change in outlook. “India continues to be among the fastest growing major economies in the world, India’s relative standing remains unaffected,” it added.

Financial stress, especially in rural areas, and low job creation calls into question how effective the nation’s government is in addressing economic sluggishness, William Foster, vice president of Moody’s sovereign risk group, wrote in a statement.

“A prolonged period of slower economic growth would dampen income growth and the pace of improvements in living standards, and potentially constrain the policy options to drive sustained high investment growth over the medium-to long term," he wrote.

Investors will closely watch the nation’s gross domestic product data for signs of further, long-lasting weakness, which could result in another negative shift, according to Moody’s. Stabilisation in the non-bank financial sector, meantime, would be credit positive and could flag less risk of negative spillover into banks.

Fibre2Fashion News Desk (DS)

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