New Delhi: Global credit rating agency Moody’s Investors Service on Monday lowered India’s sovereign (national) rating from ‘BAA2’ to ‘BAA3’ and has also changed its outlook for India from static to negative. Moody’s has also reduced its scenario from stable to negative for India. Earlier, Moody’s had said that India’s economic growth could be zero in FY 2020-21.
“The decision to downgrade India’s ratings reflects Moody’s view that the country’s policymaking institutions will be challenged in enacting and implementing policies which effectively mitigate the risks of a sustained period of relatively low growth, significant further deterioration in the general government fiscal position and stress in the financial sector,” Moody’s said on Monday.
“While today’s action is taken in the context of the coronavirus pandemic, it was not driven by the impact of the pandemic. Rather, the pandemic amplifies vulnerabilities in India’s credit profile that were present and building prior to the shock, and which motivated the assignment of a negative outlook last year,” it added.
The negative outlook reflects dominant, mutually-reinforcing, downside risks from deeper stresses in the economy and financial system that could lead to a more severe and prolonged erosion in fiscal strength, the agency said.
Moody’s also lowered India’s long-term foreign-currency bond and bank deposit ceilings to Baa2 and Baa3, from Baa1 and Baa2, respectively. The short-term foreign-currency bond ceiling remains unchanged at Prime-2, and the short-term foreign-currency bank deposit ceiling was lowered to Prime-3 from Prime-2. The long-term local currency bond and bank deposit ceilings were lowered to A2 from A1.
