Moody upgrades India’s rating

Moody’s upgrades sovereign rating, expects high growth to continue as a result of ongoing reforms
In news:
  • Global credit rating agency Moody’s Investors Services raised India’s sovereign rating for the first time in 13 years, citing the country’s high growth potential in the years to come, thanks to economic and institutional reforms.
Main inference: The continued progress on economic and institutional reforms will, over time, enhance India’s high growth potential and its large and stable financing base for government debt, and will likely contribute to a gradual decline in the general government debt burden over the medium term.
  • The Indian government’s rating as a local and foreign currency issuer from Baa3 with a positive outlook to Baa2 with a stable outlook.
  • Borrowing obligations rated Baa2 are subject to moderate credit risk. They are considered medium grade and as such may possess certain speculative characteristics.
  • Baa3, by contrast, was the lowest investment grade rating.
On debt-to-GDP ratio
  • Moody’s expects India’s debt-to-GDP ratio to rise by about one percentage point this fiscal year to 69% of GDP
Other comments by the rating agency
  • The rating agency agreed that a lot remains to be done such as fixing the GST’s implementation challenges, weak private sector investment and the slow resolution of banking bad loans
  • Moody’s said it expects at least some of these issues to be addressed over time and will help further improve the Indian government’s effectiveness and overall institutional framework

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