Downgrade of India’s Baa3 rating no longer on cards, says Moody’s

Acknowledging that India's overall fiscal situation is not as bad as it was a few months ago, global ratings agency Moody's Investors Service said today that a lowering of the country's current Baa3 (investment grade) sovereign rating is not in contemplation.

Rating agencies like Moody's, Standard & Poor and others had threatened to downgrade India if the government is not able to control the current account and fiscal deficits. However, over the last six months, the current account deficit has come down sharply, and is expected to come down to below 3 per cent of gross domestic product (GDP) for this fiscal as compared to 4.8 per cent in the previous fiscal.

Union finance minister P Chidambaram said on Wednesday that India's current account deficit for 2013-14 should be contained at around $50 billion, down from nearly $88 billion in the previous year (See: Trade deficit to be contained at $50 bn this year: Chidambaram).

Moody's expects inflation and interest rates to decline and sees a slow economic recovery in the second half of the year.

India's wholesale price inflation fell to a five-month low of 6.16 per cent in December (Wholesale price inflation at a five-month low of 6.16% in December).

The World Bank in a report on Wednesday projected India's economic growth to improve to over 6 per cent in 2014-15 (World Bank projects India's growth at over 6% in 2014-15).