New Delhi, Sept 29 (UNI) Moody’s Ratings today affirmed India’s long-term local and foreign currency issuer ratings and the local-currency senior unsecured rating Baa3.
The rating agency also affirmed India’s other short-term local-currency rating at P-3 while maintaining a ‘Stable’ Outlook.
The stable outlook incorporates India’s gradually improving fiscal metrics and resilient growth prospects compared with peers.
India’s long-term local-currency (LC) bond ceiling remains unchanged at A2, and its long-term foreign-currency (FC) bond ceiling remains unchanged at A3.
Moody’s said India’s prevailing credit strengths, including its large, fast-growing economy, sound external position and stable domestic financing base for ongoing fiscal deficits, will be sustained.
These strengths lend resilience to adverse external trends, in particular as high US (Aa1 stable) tariffs and other international policy measures hinder India’s capacity to attract manufacturing investment, it said.
A strong GDP growth and gradual fiscal consolidation will lead to only a very gradual decline in the government’s high debt burden.
“The four-notch gap between the LC ceiling and issuer rating reflects modest external imbalances as represented by persistent, albeit narrow, current account deficits; a relatively large government footprint in the economy; and moderate predictability and reliability of government policies.” Moody’s said.
Moreover, a one-notch gap between the LC and FC ceilings reflects limited external indebtedness and the low likelihood of a debt moratorium, especially in the context of recent steps towards the liberalization of non-resident portfolio investment.
Pointing towards the tariff impact on economies, Moody’s said, “The US’ imposition of high tariffs (currently at 50pc compared to 15-20pc tariff rates applied to other APAC countries) will have limited negative effects on India’s economic growth in the near term.”
However, it may constrain potential growth over the medium to long term by hindering India’s ambitions to develop a higher value-added export manufacturing sector.
Pointing towards the future policy effects also on H-1B visa fee hike , Moody’s said, “We do not expect other US policy shifts, including those related to new applications for skilled worker visas and potential levies on US businesses that outsource operations offshore, to significantly weigh on workers’ remittances or India’s services exports.”
The rating action of Moody’s follows a recent upgradation done by Japan’s Rating and Investment Information, Inc. (R&I) to ‘BBB (positive)’ from ‘BBB’. Moreover, prominent rating agencies like S&P and Morningstar DBRS also upgraded India’s credit rating this year.
Moody’s is a global integrated risk management firm that provides independent credit ratings, research data and analytical tools to help financial market participants understand and manage credit risk.
