Rupee up as Moody’s calls India outlook stable

27 Nov 2012

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Credit rating service Moody's Investors Service on Monday maintained its stable outlook and its Baa3 rating for India is stable, in part due to the country's high savings and investment rates.

In its annual credit analysis on India, which Moody's said does not constitute a rating action, the agency said India's Baa3 ranking is supported by economic growth and investment that's more than emerging-market averages.

The news helped to firm up the rupee against the US dollar.

However, Moody's cautioned, "The rating is constrained by the credit challenges posed by India's poor social and physical infrastructure, high government deficit and debt ratios, recurrent inflationary pressures and an uncertain operating environment."

The rating has also been constrained due to the country's complex regulatory environment and a tendency towards inflation, Moody's added.

The government aims to restrict the fiscal deficit to 5.3 per cent of GDP this fiscal. It has also announced a slew of measures to spur infrastructure development and liberalised foreign direct investment norms.
 
''However, given the delayed timing and still modest scope of these (liberalisation) measures, growth may remain subdued in the near term. Continued domestic political uncertainty and a global slowdown remain,'' Moody's added.

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