Worrying macro dynamics

Growth in govt spending is leading to fiscal stress, crowding out

The downgrade of India’s sovereign debt rating by Moody’s Investors Service has largely been shrugged off by the markets. Perhaps it was already priced in, as the downgrade brings that agency’s rating in line with those of the other two at the lowest rung of investment grade. But nevertheless the downgrade does signal service by highlighting an emerging scenario when it comes to India’s macroeconomic dynamics. Moody’s claimed that it expected general government debt to rise from 70 per cent of gross domestic product (GDP) to around 84 per cent. This tells a story that is reinforced by the data