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Moody’s Credit Rating for India

Posted on : 23 Jan 2020

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  • Moody’s Investor Service, which is a leading provider of credit ratings, research, and risk analysis has changed its outlook for India’s sovereign rating(Baa2) from stable to negative, saying that the domestic economic downturn could be structural.
  • The agency’s action does not amount to a rating downgrade but comes as a caution against policy inaction.
  • Moody’s credit rating of Baa2, the second-lowest investment grade score, is better than those of other agencies, such as S&P and Fitch, who have assigned the lowest investment grade to India with a stable outlook.
  • Moody’s forecast predicted a 6.6 per cent of GDP growth for the current fiscal year.
  • The agency projected a fiscal deficit of 3.7 per cent of GDP in the current financial year, compared to the budgeted target of 3.3 per cent.
  • India’s ratings were upgraded to Baa2 from Baa3 in 2017 citing progress on 'economic and institutional reforms’.
  • Rating agencies are ultra-sensitive to fiscal deficit overruns but the positive factor here is that India’s borrowings are almost wholly domestic.
  • External debt to GDP is just 20% but the ratings do have an impact on investor sentiment.

Article Related Questions

  1. Consider the following statements regarding the recent credit rating released by Moody’s Analytics for India
    1.It lowered back India’s credit rating from Baa2 to Baa3 in 2019.
    2.It predicted a fiscal deficit of 3.7% of GDP as against the 3.3% set for the current financial year.
    Which of the above statements is/are correct?

  2. 1.1 only

    2.2 only

    3.Both 1 and 2

    4.Neither 1 nor 2

    Right Ans : 2 only

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