Moody's cuts In­dia’s out­look to 'neg­a­tive' Even as govern­ment in­sists eco­nomic fun­da­men­tals are strong

The Free Press Journal - - FRONT PAGE -

Global rat­ing agency Moody's In­vestors Ser­vice on Fri­day cut In­dia's out­look from 'sta­ble' to 'neg­a­tive' re­flect­ing the in­creas­ing risks to the coun­try's eco­nomic growth and the govern­ment's fail­ure in ad­dress­ing long­stand­ing eco­nomic and in­sti­tu­tional weak­nesses.

The govern­ment how­ever, said that In­dia con­tin­ues to be among the fastest grow­ing ma­jor economies in the world, and its rel­a­tive stand­ing re­mained un­af­fected. BSE Sen­sex was down 300 points.

Moody's is among the grow­ing list of global agen­cies, in­clud­ing the Re­serve Bank of In­dia, which have down­graded the In­dia growth story for sim­i­lar rea­sons. Fitch Rat­ings and S&P Global Rat­ings still hold In­dia's out­look at 'sta­ble'.

Warn­ing that In­dia could be head­ing for a debt trap and re­ces­sion­ary phase, the agency said it doesn't ex­pect the credit crunch among non-bank fi­nan­cial in­sti­tu­tions, the main source of con­sumer loans in re­cent years, to be re­solved quickly.

At a six-year low, In­dia's econ­omy grew only 5.0 per cent year-on-year be­tween April and June, its weak­est pace since 2013, as con­sumer de­mand and govern­ment spend­ing slowed amid global trade fric­tions.

Moody's also af­firmed In­dia's Baa2 for­eign-cur­rency and lo­cal-cur­rency long-term is­suer rat­ings.

Baa2 is the sec­ond-low­est in­vest­ment grade score, and the agency said it could down­grade the na­tion if fis­cal met­rics de­te­ri­o­rate ma­te­ri­ally.

Back­ing its other rat­ings for In­dia, the agency said it es­ti­mates that the coun­try's growth slow­down is in part long-last­ing.

How­ever, the Fi­nance Min­istry cited the IMF's lat­est world eco­nomic out­look that In­dian econ­omy is set to grow at 6.1% in 2019 and 7% in 2020. It also said the fun­da­men­tals of the econ­omy re­main quite ro­bust with in­fla­tion un­der check and bond yields low.

The down­grade puts ad­di­tional pres­sure on In­dia, which tried to re­vive de­mand in Septem­ber with an un­ex­pected cut in cor­po­rate taxes. But chances of more such re­forms have di­min­ished, and Moody's ex­pects the govern­ment to strug­gle to nar­row its deficit or con­tain a grow­ing debt bur­den. Main in­put:IANS

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