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New Delhi: Global rating agency Moody’s on Friday said India’s ratings may be downgraded if the government debt rises substantially, due to a lack of medium-term reforms and delay in privatisation among others.
“... if the Indian government’s debt finance-ability and its debt sustainability were to worsen—due to a lack of medium-term reforms or delays in privatiszation, or due to large unexpected shocks—then negative rating actions may follow, “ Moody’s vice-president and senior analyst Aninda Mitra said. He said the recent Budget announcement is in line with its stable outlook on India’s ratings.
However, Mitra added that India’s overall deficit is larger than the countries which are given the same ratings by Moody’s.
“The overall deficit out-turn is larger than those of India’s Baa—and Ba-rated peers, but it is at the same time based on conservative macro-economic assumptions, and still broadly consistent with the near-term stability in the government’s debt trajectory,” said Mitra.
The Centre’s fiscal deficit is projected to widen to an 18-year high of 6.8% of GDP in the current fiscal.
The rating agency further said that India’s growth momentum remains strong and will continue to benefit from expansionary fiscal and accommodative monetary policies and expects GDP growth to reach 6% in the current fiscal. “Moreover, the government has the political scope to formulate a robust response to emerging challenges and this consideration is also incorporated into the stable outlook Moody’s currently maintains on the sovereign ratings,” it added.
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