Moody’s keeps India’s ratings but cites debt, political risks

livemint.com:

MUMBAI : Moody’s Investors Service on Friday affirmed India’s long-term local and foreign-currency issuer ratings at Baa3 and retained the stable outlook while flagging risks from the country’s “high debt burden" and curbs on political dissent. The current rating of Baa3 and stable outlook, Moody’s said, also consider a “curtailment of civil society and political dissent, compounded by rising domestic political risk".

It reaffirmed the local-currency senior unsecured rating at Baa3 and India’s other short-term local-currency rating at P-3. “The affirmation and stable outlook are driven by Moody’s view that India’s economy is likely to continue to grow rapidly by international standards, although potential growth has come down in the past 7-10 years," it said.

High gross domestic product growth will contribute to gradually rising income levels and overall economic resilience, which will, it said, support gradual fiscal consolidation and government debt stabilization, albeit at high levels. Moody’s expects India’s economic growth to outpace all other G20 economies through at least the next two years, driven by domestic demand.

Moody’s said India’s financial sector continues to strengthen, alleviating much of the economic and contingent liability risks that had previously driven downward rating pressure. The rating agency said India’s fiscal strength remains a key weakness in the sovereign credit profile, balancing high economic strength and expects high nominal GDP growth and ongoing fiscal consolidation to stabilize the government debt burden at high levels.