Moody's retains stable outlook on India sovereign rating

Moody's Investors Service still considers India’s sovereign ratings at 'stable', saying the growth slowdown was not irreversible, while the current 'Baa3' rating reflected the country's medium-term outlook.. Moody's announcement should come as a relief for policymakers, whose spate of reform measures failed to elicit positive reviews from most rating agencies and investment banks, the latest being Standard & Poor’s.. S&P had earlier cautioned that India could be the first country among the BRIC (Brazil, Russia, India and China) group to lose its investment grade rating.. “However, the effect of the announced reforms on the government’s credit profile is minimal because they are either too small to have material sovereign credit benefits or carry implementation or rollback risks that outweigh any credit positive benefits,” Moody’s stated in a note after the government announced a spate of reforms two weeks back.. The rating agency in August lowered India’s growth forecast for 2012 to 5.5 per cent and to below 6 per cent for 2013, blaming the “instability created by a government that has badly lost its way”.. “The diesel price increase, along with a cap on households’ use of subsidized cooking gas, signals the government’s willingness to lower its fiscal deficit by embracing the politically unpopular decision of raising prices. However, it will reduce the government’s fiscal deficit by only approximately 0.1 per cent of GDP. As a result, even with the decrease in the diesel subsidy, we still expect the slowdown in government revenue growth.”

Moody's retains stable outlook on India sovereign rating

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