Moody's outlook downgrade for India: Backward-looking course correction

Moody's recent downgrade highlights that the agency's robust expectations in 2017 were misplaced

After two years of upgrading its rating to Baa2 (stable outlook) on November 16, 2017, Moody’s has now downgraded India’s sovereign rating to 'negative' from 'stable'.

We believe Moody’s lack of conviction on its earlier rating has come in too soon. In its earlier rating, the agency cited that structural reforms would feed into strong growth outlook, which would improve India’s debt repayment and servicing capability.  Moody’s anticipated that reforms by the incumbent government would usher in the improved business climate, enhance productivity, stimulate investments, and ultimately foster strong and sustainable growth.

In contrast, Moody’s now sees increasing risks to