By Martin Shwenk Leade
Copyright indiatimes
New Delhi: Global ratings agency Moody’s on Monday retained its sovereign credit rating on India at the lowest investment grade of ‘Baa3’ with a ‘stable’ outlook, weeks after S&P upgraded its rating on the country for the first time in 18 years.The move reflects “our view that India’s prevailing credit strengths, including its large, fast-growing economy, sound external position and stable domestic financing base for ongoing fiscal deficits will be sustained”, Moody’s said in a statement. These strengths lend resilience to adverse external trends, particularly as “high US tariffs and other international policy measures hinder India’s capacity to attract manufacturing investment”, it said.The agency doesn’t expect the latest US policies, including on visas, to significantly weigh on workers’ remittances or India’s services exports. Consequently, risks of a spike in current account deficit remain limited, it said.However, India’s credit strengths are balanced by “long-standing weaknesses on the fiscal side”, it added.The latest goods and services tax (GST) relief, on top of the income-tax breather announced in the budget for 2025-26, have “narrowed the tax base and will result in foregone revenue, thus curtailing potential improvements in debt affordability”, it argued.Live Events Moody’s has retained its rating at the same level since 2020, having reversed an upgrade it gave to India in November 2017, which was a first in 14 years. Fitch has kept its India rating unchanged since 2006.These are in contrast with the rating upgrade for India by three global agencies this year.S&P, the biggest of the global ratings firms, raised its rating on India last month to ‘BBB’ from lowest investment grade of ‘BBB-‘, citing resilience and sustained fiscal consolidation.It was preceded by an upgrade by Morningstar DBRS to ‘BBB’ from BBB (low) in May and followed by Japanese agency R&I raising its rating on India to ‘BBB+’ from ‘BBB’ earlier this month.Moody’s contended that India’s strong economic growth and gradual fiscal consolidation will lead to an “only very gradual decline in the government’s high debt burden”.These will not be sufficient to materially improve weak debt affordability, especially as recent fiscal measures to reinforce private consumption erode the government’s revenue base, the agency said.It expects India to remain the world’s fastest-growing economy for at least the next 2-3 years. It has projected the country’s growth rate to touch 6.5% in 2025-26, the same as the last fiscal.The agency said the extra 50% US tariffs (compared to 15-20% tariff rates applied to other Asia-Pacific countries) will have limited negative effects on India’s growth in the near term.The agency said the rating could be upgraded if there is a material improvement in India’s debt affordability to levels more consistent with higher-rated peers. Similarly, downward pressure on the rating would stem from durably weaker growth than projected or a reversal in recent gains from fiscal consolidation that would contribute to significant worsening in debt affordability.Add as a Reliable and Trusted News Source Add Now!
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