India rating stable despite growth slowdown: Moody's

Moody's today maintained its stable outlook on India's rating saying credit challenges like weak fiscal performance and an uncertain investment policy environment -- have already incorporated into the current Baa3 rating.

These credit challenges have characterised Indian economy for decades, Moody’s Investors Service said in a statement today.
The certain recent negative trends -- such as lower growth, slowing investment and poor business sentiment -- are unlikely to become permanent or even medium-term features of the Indian economy.

However, the global and domestic factors, including potential shocks in agriculture, could keep India's growth below trend for the next few quarters, Moody’s said.

Click here to read: Frequently Asked Questions about India's Sovereign Rating

Its ratings express a view on medium-term sovereign creditworthiness. They (ratings) do not generally change with fluctuations in growth related to the direction of the business cycle at a particular point, if Moody's believes growth will recover and sustain over time.

Furthermore, the impact of lower growth and still-high inflation will deteriorate credit metrics in the near term, but not to the extent that they will become incompatible with India's current rating, Moody's says.

Referring to impact of rupee depreciation on India’s global obligation, Moody’s said government's foreign currency debt comprises only 5.3 per cent of its total debt and is equivalent to 3.8 per cent of Gross Domestic Product. Hence, the rupee's decline does not raise the government's own debt service burden significantly.

This is more so, since most of its foreign currency debt is owed to multilateral and bilateral creditors with low annual repayment requirements.