Future growth will help cut Indian government debt: Moody's

India's sovereign credit rating upgrade by Moody's has been based on the belief that the recent economic reform measures will bolster the country's growth potential leading to a decline in government debt, the US ratings agency said on Friday.

Earlier in the day, signalling a boost to investor sentiments, Moody's Investor Service upgraded India's sovereign rating to Baa2 from its lowest investment grade of Baa3 after 13 years, while changing the outlook to stable from positive, and said its upgrade was based on the Indian government's "wide-ranging programme of economic and institutional reforms".

"In the medium term, we see sustained high growth resulting in a reduction in government debt," Moody's Senior Vice President Marie Diron told BTVi in an interview.

"In the short term, we have lowered India's growth projection for the current fiscal to 6.7 per cent on account of the slowdown caused by demonetisation and implementing the GST," she said.

"Next year, we are looking at a growth of 7.5 per cent and, thereafter, sutained growth to sustain in the following years," she added.

Regarding upgrade of the outlook to stable from Baa3 positive, Diron said: "The stable outlook communicates that the risks are broadly balanced and that we do not expect this rating to change in the foreseeable future."

"Moody's believes that the reforms put in place have reduced the risk of a sharp increase in debt, even in potential downside scenarios," a release from the American agency said earlier on Friday.

Noting that Indian fiscal deficit and government debt have traditionally been bigger than "other Baa3 rated sovereigns", Diron said "Indian budget deficits had narrowed significantly over time".

--IANS

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