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Moody’s downgrades India’s credit outlook to ‘negative’

Moody’s downgrades India’s credit outlook to ‘negative’

Mubasher: Moody’s Investors Service lower India’s outlook to negative from stable, citing worries that the Asian nation’s economic growth will remain lower than in the past years.

The international ratings agency confirmed the Baa2 foreign-currency and local-currency long-term issuer ratings.

The move to downgrade the outlook was ascribed to growing risks that India’s economic expansion “will remain materially lower than in the past,” Moody’s said.

This, in part, reflected “lower government and policy effectiveness at addressing long-standing economic and institutional weaknesses than Moody's had previously estimated, leading to a gradual rise in the debt burden from already high levels,” the agency noted.

While the Indian government actions to boost the economy should mitigate the severity and duration of slowdown, the risk of a more entrenched slowdown grew due to a protracted financial stress among rural households, weak job growth and the latest credit crunch among non-bank financial institutions.

Moreover, Moody’s also maintained the country’s Baa2 local-currency senior unsecured rating and P-2 other short-term local-currency rating.

In response to Moody’s downgrade, the Finance Ministry stated that “India continues to be among the fastest growing major economies in the world, [as the country’s] relative standing remains unaffected.”