Moody's review meet with govt to focus on global trade, Indo-Pak conflict

Moody's will meet Indian officials on Thursday in Delhi for its semi-annual review of India's sovereign rating amid rising geopolitical tension and trade disruption

The recent India-Pakistan conflict and global trade tensions will be in focus during the global rating agency Moody's meeting with the officials of the Union government in New Delhi on Thursday to review India’s sovereign ratings.

 

This is the first such exercise after the recent stand-off with Pakistan.

 

“Our reviews are ongoing, and we do have a semi-annual cycle for reviews, and we're taking this opportunity, while we're in India, to continue to engage with the government,” said Christian de Guzman, senior vice-president, Moody's Ratings, in response to a query from Business Standard.

 

Guzman said the current ratings on India factor in geopolitical risks like conflict with Pakistan.

 

“I think when we engage with the government, we engage on everything,” he said, adding the events that have happened with Pakistan, including the escalation of the conflict and the subsequent de-escalation, are consistent with Moody’s view on political risk.

 

Moody's currently maintains India's sovereign rating at “Baa3” with a stable outlook, which is the lowest investment-grade rating. Rating agency officials had earlier met Indian officials in April in Washington, DC, at Spring Meetings of the World Bank Group (WBG) and the International Monetary Fund (IMF). 

 

Referring to the impact of the global tariff shock on growth, Guzman said, “We have reviewed our expectations for growth across the G20, and we have adjusted those growth forecasts in a manner that is consistent with their exposure to the tariff shock. In the case of India, that exposure, in relative terms, is small”.

 

In early May, Moody’s had lowered growth forecasts for India by 30 basis points to 6.3 per cent for 2025.

 

Moody’s in its note on India (May 21) had observed that persistent tensions, such as the recent escalation between India and Pakistan, are accounted for in its geopolitical risk assessment.

 

“In a scenario of sustained escalation in localised tensions, we do not expect major disruptions to India's economic activity because it has minimal economic relations with Pakistan,” the note said.

 

Moreover, the parts of India that produce most of its agricultural and industrial output are geographically distant from the conflict zones. However, higher defence spending would potentially weigh on India's fiscal strength and slow its fiscal consolidation, it added.

 

India was better positioned than many other emerging markets to deal with US tariffs and global trade disruptions, helped by robust internal growth drivers, a sizable domestic economy and a low dependence on goods trade, according to a Moody’s note on impact of tariff on emerging markets.

 

The significant government investments will bolster sectors from infrastructure to manufacturing, at a time when rapid urbanisation and a young population is underpinning structural demand for housing and consumer goods. Easing inflation offers the potential for interest rate cuts to further support growth, the agency had said.