Moody's maintains 'stable' outlook on India's rating
25 June 2012
Moody's Investors Service has maintained its stable outlook on India's rating as various credit challenges, including weak fiscal performance, which ''have characterised the Indian economy for decades,'' and are already incorporated into the current Baa3 rating.
The ratings agency also listed the tendency towards inflation and an uncertain investment policy environment among the credit challenges confronting India. But despite GDP growth slowdown in India, the agency on Monday maintained a stable outlook for the country.
According to the agency, certain recent negative trends including lower growth, slowing investment and poor business sentiment are unlikely to become permanent or even medium-term features of the Indian economy.
However, Moody's expects that global and domestic factors, including potential shocks in agriculture, could keep India's growth below trend for the next few quarters.
The agency noted that its ratings express a view on medium-term sovereign creditworthiness and do not generally change with fluctuations in growth related to the direction of the business cycle at a particular point, if it believes growth will recover and sustain over time.
The impact of lower growth and still-high inflation will deteriorate credit metrics in the near term, but not to the extent that they will become incompatible with India's current rating, the agency declared in its newly released "Frequently Asked Questions about India's Sovereign Rating."