Moody’s Blues: Rat­ings Agency Cuts In­dia Out­look to Neg­a­tive

Govt coun­ters view, says fun­da­men­tals of econ­omy re­main ro­bust

The Economic Times - - Front Page - Our Bureau

THE RED FLAGS

Moody’s raises con­cerns over lower growth Says govt steps may not ar­rest pro­longed slow­down

Dim prospects of more re­forms to push growth

Slower growth to dampen in­come growth

Over­seas bor­row­ing costs to rise

Con­straints in nar­row­ing govt’s bud­get deficit

Fore­casts fis­cal slip­page by 0.4 per­cent­age points to 3.7%

GOVT’S TAKE

Fun­da­men­tals of econ­omy ro­bust In­fla­tion un­der check, bond yields low

In­dia of­fers strong prospects of growth in near and medium term Steps taken to stim­u­late growth

New Delhi: In­ter­na­tional rat­ings agency Moody’s In­vestors Ser­vice cut In­dia’s out­look to neg­a­tive from stable, cit­ing in­creas­ing risks to growth and a rise in the debt bur­den. Stocks tum­bled and the ru­pee weak­ened.

The move came two years af­ter Moody’s had up­graded the coun­try. It, how­ever, af­firmed the Baa2 for­eign and lo­cal-cur­rency, longterm is­suer rat­ing on Fri­day. In line with the de­vel­op­ment, changes were ef­fected in the out­look of In­dian banks and other com­pa­nies. The ru­pee ended at 71.29 per dol­lar, the low­est in about three weeks.

“Moody’s de­ci­sion to change the out­look to neg­a­tive re­flects in­creas­ing risks that eco­nomic growth will re­main ma­te­ri­ally lower than in the past, partly re­flect­ing lower gov­ern­ment and pol­icy ef­fec­tive­ness at addressing long-stand­ing eco­nomic and in­sti­tu­tional weak­nesses than Moody’s had pre­vi­ously es­ti­mated, lead­ing to a grad­ual rise in the debt bur­den from al­ready high lev­els,” the rat­ing agency said.

The gov­ern­ment coun­tered the agency’s view. “Fun­da­men­tals of the econ­omy re­main quite ro­bust with in­fla­tion un­der check and bond yields low,” a fi­nance min­istry re­lease said. “In­dia con­tin­ues to of­fer strong prospects of growth in the near and medium term.”

A gov­ern­ment of­fi­cial said, “The out­look change is an asym­met­ric re­sponse not war­ranted by fun­da­men­tals.” Even the rat­ing up­grade two years ago had come at the fag end of the up­ward cy­cle, he said.

‘Up­grade Un­likely in Near Term’

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