Moody’s Investors Services on Monday downgraded India’s sovereign ratings. The drop in the ratings comes as it assessed that the country’s policy making institutions will be challenged to mitigate the risks of a sustained period of relatively low growth.
Indian economy is staring at a year of contracting growth rates, struck by the pandemic triggered crisis.
Such an assessment by the international credit rating agency resulted in the downgrading of India’s foreign-currency and local-currency long-term issuer ratings to Baa3 from Baa2.
It also downgraded India’s local-currency senior unsecured rating to Baa3 from Baa2, and its short-term local-currency rating to P-3 from P-2.
Besides, it kept the outlook as negative. Currently, the sovereign rating assigned to India is Baa2 with a negative outlook.
“The decision to downgrade India’s ratings reflects Moody’s view that the country’s policy making institutions will be challenged in enacting and implementing policies which effectively mitigate the risks of a sustained period of relatively low growth, significant further deterioration in the general government fiscal position and stress in the financial sector,” Moody’s said.
“The negative outlook reflects dominant, mutually-reinforcing, downside risks from deeper stresses in the economy and financial system that could lead to a more severe and prolonged erosion in fiscal strength than Moody’s currently projects,” it added.