Rating agency Moody’s believes that India’s economic growth rate over the last 7-10 years has not been in line with potential.
New Delhi:
Rating agency Moody’s with a stable outlook India Ltd.’s credit rating has been maintained at Baa3 rating. On Friday, the rating agency said higher growth rates would lead to a gradual rise in income levels, which would strengthen economic conditions. Along with this, Moody’s has also warned of risks associated with adopting democratic policies amid rising political tensions in the country. Moody’s predicts that India’s economic growth rate will remain higher than that of the G-20 economies for at least the next two years, driven by domestic demand.
The rating agency believes that India’s economic growth rate over the last 7-10 years has not been in line with potential, but the Indian economy is likely to grow rapidly by international standards.
India’s other short-term local-currency rating has been maintained at P-3
“Moody’s Investors Service has affirmed the Government of India’s long-term domestic and foreign currency issuer ratings and Baa3 rating on the local currency,” the US rating agency said in a statement. Moody’s also maintained India’s other short-term local-currency rating at P-3. The outlook remains stable.” BAA3 is considered the lowest investment grade rating.
American rating agency Moody’s has expressed this apprehension
Moody’s said the restoration of strong growth prospects after the Covid pandemic, an effective commitment to inflation control and an improvement in the financial system support its view of the effectiveness of monetary and macroeconomic policies. Along with this, Moody’s has also expressed some apprehensions.
But domestic political tensions threaten to rise
In its commentary, the rating agency said, “Civil society and sectarian tensions along with curbs on political dissent support a weak assessment of political risk and institution quality.” There is no possibility of destabilization, but due to rising domestic political tensions, support for political dissent. Risk of adopting populist policies at the level of regional and local governments. Social risks such as poverty and income inequality already exist.
All three global rating agencies have given India a stable outlook.
All three global rating agencies, including Moody’s, have given India the lowest investable rating with a stable outlook. Earlier, Fitch and S&P had also given the same rating to India. A country’s rating reflects its creditworthiness and also affects the cost of borrowing.
“Higher growth in gross domestic product (GDP) will contribute to a gradual increase in income levels and overall economic strength,” Moody’s said. This will support fiscal consolidation and also help stabilize government debt. Apart from this, due to the continued strengthening of the financial sector, the risk to the financial and liability level will also be removed.