India's rating outlook stable despite GDP growth slowdown: Moody's

Business

oi-Sneha

By Sneha B K

Published: Monday, June 25, 2012, 12:25 [IST]

Global credit rating agency Moody's on Monday said that it is maintaining its stable outlook on India's rating as various credit challenges such as weak fiscal performance, tendency towards inflation and an uncertain investment policy environment have characterized the Indian economy for decades, and are already incorporated into the current Baa3 rating.

The agency also said that certain recent negative trends such as lower growth, slowing investment and poor business sentiment are unlikely to become permanent or even medium-term features of the Indian economy.

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.

Furthermore, 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, further added.

On the issue of the rupee's depreciation, Moody's says that as the government's foreign currency debt comprises only 5.3% of its total debt and is equivalent to 3.8% of GDP, the rupee's decline does not raise the government's own debt service burden significantly, especially since most of its foreign currency debt is owed to multilateral and bilateral creditors with low annual repayment requirements.

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