Moody's says India's rating outlook stable despite growth slowdown
2012-06-25 11:02:19
Moody's Investors Service on Monday said it is maintaining stable outlook on India's sovereign rating despite credit challenges.
The current 'Baa3' rating already incorporates various challenges such as weak fiscal performance, tendency towards inflation and an uncertain investment policy environment, it said.
Moody's expects global and domestic factors, including potential shocks in agriculture, could keep India's growth below trend for the next few quarters.
However, certain recent negative trends like lower growth, slowing investment and poor business sentiment are unlikely to become permanent or even medium-term features of the Indian economy, said Moody's.
Moreover, lower growth as well as high inflation will impact credit metrics in the near term, but it will not make the current rating incompatible.
Further, the agency said India's government debt and fiscal deficit ratios have always been worse than those of similarly rated peers.
On the issue of the rupee's depreciation, Moody's said the rupee's decline does not raise the government's own debt service burden significantly as foreign currency debt comprises only 5.3 percent of its total debt and is equivalent to 3.8 percent of GDP.