Hung election verdict may hurt India credit rating: Moody's

Hung election verdict may hurt India credit rating: Moody's
According to a PTI report, leading global rating agency Moody's has warned that a hung election verdict could have a severely negative impact on the credit quality of Asia's third biggest economy, which has grown below the 5 per cent mark for the past few quarters.

A stable, strong, growth and reform oriented government at the centre would be necessary to kick-start long stalled reforms, speed up decision making on key infrastructure projects, revive the investment climate, and thereby spurring high growth.

Moody's warned that if the electoral verdict results in a fragmented coalition of smaller parties without any common reform and economic goals, the outcome may be negative for the country's economy and could deteriorate India's credit quality.

"History has often revealed election outcomes to be quite different from poll data, and parliamentary arithmetic has resulted in coalition governments for about the last two decades. The biggest electoral threat to credit quality would be if a fragmented coalition of smaller parties without a common economic reform goals comes to power", Moody's said, the PTI reported.

If a fragmented government comes into power, it may lead to capital outflows as foreign investors' sentiment towards India weakens, raise borrowing costs, weaken the rupee, delaying economic rebound and making fiscal consolidation even tougher, Moody's' said.

Read more about: moodys, election 2014
Story first published: Friday, May 2, 2014, 9:10 [IST]
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