Moody’s retains India’s rating
New Delhi, Jan. 20: Retaining India’s credit rating at the existing level, global agency Moody’s has cautioned that a high fiscal deficit could pull down the growth in the coming years.
“Large government deficits and debt ratios as well as supply constraints in the form of infrastructure, policy and administrative inefficiencies constrain the sovereign credit profile,” Moody’s said in India rating report.
On the positive side, the global rating agency reaffirmed sovereign credit rating of India at Baa3, which indicates investment grade, with a stable outlook. “Government
Robust domestic savings and a dynamic private sector would provide strength to India’s economic growth in the medium term
finances are the weakest aspect of India’s macroeconomic profile. We expect the government’s fiscal position to remain weaker than peers over the medium term,” it said, adding sustained improvement in public finances could result in a rating upgrade.
As regards growth prospects, it said that a downturn was underway, which could be exacerbated by slower global growth.
However, robust domestic savings and a dynamic private sector would provide strength in the medium term, it added.
Moody’s expect the Indian economy to grow by 5.4 per cent in the current fiscal and 6 per cent in 201314. Last fiscal, the economy grew by 6.5 per cent.
It further said that while high commodity prices have raised the subsidy bill, the government’s measures to reduce fuel and fertiliser subsidies were too modest to compensate for high global commodity prices.
The report has not taken into account the recent decision of the government to partially deregulate diesel and allow oil market companies to raise price by 45-50 paise every month, it said.
The government had raised the fiscal deficit target for the current fiscal to 5.3 per cent of the GDP, from 5.1 per cent, in view of increased subsidy outgo.
“Fiscal data available thus far suggest that meeting the deficit will present a challenge,” Moody’s said. — PTI