Moody's bullish on India growth; reaffirms stable outlook

Moody's Investors Service said it was "maintaining its stable outlook on India's current 'Baa3' rating.

According to Moody's, various credit challenges such as weak fiscal performance, tendency towards inflation and an uncertain investment policy environment, "have characterised the Indian economy for decades, and are already incorporated" into the rating.

On the other hand, the agency noted that certain recent negative trends -- lower growth, slowing investment and poor business sentiment -- "are unlikely to become permanent or even medium-term features of the Indian economy"

Reacting to it, Prime Minister's Economic Advisory Council Chairman C Ranagarajan said, "Well, I think it's good that Moody's has affirmed the stable grade. It also shows that the Indian economy is right on the track".

Moody's affirming India's stable outlook comes against the backdrop of two of its rivals -- Standard & Poor's and Fitch -- lowering the credit rating outlook to negative.

Morgan Stanley has also lowered India's growth forecast.

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

India, one of the fastest growing economies, is faced with slow growth and falling rupee. GDP growth rate fell to 6.5 per cent in 2011-12 from 8.4 per cent in past two fiscals.

On the rupee's sharp depreciation, Moody's said it does not raise the government's own debt service burden significantly. MORE