“For India, we expect a sharp slowdown in growth, with real gross domestic product (GDP) growth averaging 0.2 per cent in CY20, down from our previous forecast of 2.5 per cent,” said Moody’s in a statement. Moody’s rating for the Indian government is Baa2, with a negative outlook.
The rapid and widening spread of the coronavirus, deteriorating global economic outlook, falling oil prices, and turmoil in the financial markets are creating severe and extensive economic and financial shock. The lower growth rate and government revenue generation, coupled with the coronavirus-related fiscal stimulus, will lead to a higher government debt ratio, which we project will rise to 81 per cent of the GDP in a few years.
India’s credit profile is supported by its large and diverse economy, and a stable domestic financing base. This is balanced against high government debt, weak social and physical infrastructure, and a fragile financial sector.
The negative outlook reflects increasing fear of the economic growth remaining significantly lower than the past. This is in light of the deep shock triggered by the virus outbreak.
It also partly reflects lower government and policy effectiveness at addressing longstanding economic and institutional weaknesses.
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