Moody's Investors Service says the depreciating rupee will only have a "limited" impact on India's sovereign ratings, as only 7% of total government debt is placed overseas, comprising 5% of gross domestic product.
The bigger pain would come in the private sector, Moody's said in a weekly credit report out on Monday, given that a falling rupee will raise the cost of paying back foreign currency borrowings.
Still, the agency said total private sector external debt is at a "relatively low" 16% of GDP, meaning the impact on the sovereign ratings from this private sector exposure would also be limited.
"Individual firms' foreign debt repayment troubles are unlikely to lead to the sort of domestic demand collapse or deleveraging seen in countries with more significant private-sector external leverage," it said.
The rupee has been hitting record lows against the dollar because of concerns about the country's widening current account gap as well as the fiscal deficit. It has recovered somewhat since its latest record low of 56.40 hit on Thursday.
Most of the government's debt is owed to multilateral or bilateral creditors and has a maturity profile that keeps annual repayments relatively low, according to Moody's.
In terms of the private sector, the rupee fall is credit negative for firms without export revenues and with foreign debt obligations, Moody's noted, though it adds these borrowings must be viewed in the context of India's nearly $300 billion in foreign exchange reserves.
