Moody’s affirms India’s Baa3 rating with stable outlook

economictimes.indiatimes.com:

Moody’s Investor Service Friday affirmed India’s 'Baa3' rating with a stable outlook. The ratings agency said that rising growth will contribute to higher income levels and overall economic resilience.

It also noted that India is likely to grow faster than other major economies, even if potential growth for the country has come down to 6-6.5% over the past 7-10 years, compared to 7% in the middle of the last decade. “Moody's expects India's economic growth to outpace all other G20 economies through at least the next two years, driven by domestic demand,” the rating agency said in justification of affirmation of India’s rating.

The agency also lauded the government’s efforts on infrastructure, which it noted, had led to improvements in logistic performance and quality of trade and transport-related infrastructure. This coupled with investments in digital public infrastructure had boosted formalisation of economy and broadened the tax base.

“Moody's expects that the economic benefits of the DPI will materialise over time and support India's growth potential,” the agency pointed further stating that “the economic and social benefits of digitalisation could be larger than currently assumed by Moody's.” It said that constraints on delivering significant improvement in manufacturing and job creation could limit potential growth. “The curtailment of civil society and political dissent, compounded by rising sectarian tensions, support a weaker assessment of political risk and the quality of institutions,” Moody’s noted, pointing to the Manipur incident.

The rating agency also cautioned against rising inflation as a threat to the outlook. “Upside risks to inflation and correspondingly higher interest rates could challenge efforts