Moody’s Investors Service credit rating cut India’s ratings outlook to ‘negative’ from ‘stable. Moody’s Investors Service said that its action partly reflects government and policy ineffectiveness in addressing economic weakness, which led to an increase in debt burden from already high levels.
After Moody’s Investors Service cut its outlook on the country’s rating to ‘negative’ from ‘stable’ the government immediately responding to the development.
It said India continues to retain itself amongst the fastest-growing major economies in the world and its relative standing remains unaffected.
The Ministry of Finance issued a statement that read “As India’s potential growth rate remains unchanged, assessment by the International Monetary Fund (IMF) and other multilateral organisations continue to underline a positive outlook on India.”
“These measures will lead to a positive outlook on India and attract capital flows and stimulate investments.”
The ministry explained that the fundamentals of the economy remain quite robust with inflation under check and bond yields low.
It added that the recent series of reforms including a sharp cut in corporate taxes in a bid to woo global investors would stimulate and consolidate the economy.
“India continues to offer strong prospects of growth in the near and medium-term,” read the Ministry of Finance in its issued statement.
THE FACTORS FOR SLOWDOWN ACCORDING TO MOODY’S
The rating agency said the country’s growth outlook and credit rating saw a sharp low this year. Particularly due to the cash-crunch in the non-banking financial institutions (NBFIs) as a result spreading to other major sectors and heavy industries like the automotive sector, retail businesses, and home sales.
The domestic auto sector is facing one of its worst slowdowns in decades and the unemployment rates rose to 8.5 per cent in October. Again, this is the highest number since August 2016 and the worst in five years.
Where India is proactively taking steps to reverse the down effects of the slump in the Indian economy, Moody’s Investors Service’s latest credit rating might just come as an added weight on Finance Minister Nirmala Sitharaman.
INDIA’S FISCAL DEFICIT
However, the global rating agency has forecast India’s fiscal deficit of 3.7 per cent in the year through March 2020-an increase of 3.3 per cent from the government’s target.
In its latest World Economic Outlook, the IMF said that the Indian economy is set to grow at 6.1 per cent in 2019, picking up to 7 per cent in 2020.