Moody’s retains stable Baa3 outlook for India
21 Jan 2013
Ratings agency Moody's Investors Service has retained India's credit rating at its current level of Baa3, which is the lowest investment level; but has cautioned that a high fiscal deficit could pull down economic growth in the coming years.
It said government finances are the "weakest aspect'' of India's macroeconomic profile.
"Large government deficits and debt ratios as well as supply constraints in the form of infrastructure, policy and administrative inefficiencies constrain the sovereign credit profile," Moody's said in its India rating report.
''We expect the government's fiscal position to remain weaker than peers over the medium term," it said even as it maintained its 'stable' outlook at the Baa3 level. It added that sustained improvement in public finances could result in rating upgrade.
On growth prospects, it said that a downturn was in progress, which could be exacerbated by slower global growth. However, robust domestic savings and a dynamic private sector would provide strength in the medium term.
Moody's expect Indian economy to grow 5.4 per cent in the current fiscal and 6 per cent in 2013-14. Last fiscal, the economy grew 6.5 per cent.
It further said that while high commodity prices have raised the subsidy bill, and the government's measures to reduce fuel and fertilizer subsidies were too modest to compensate for high global commodity prices.