Moody's Maintains India's Rating At Baa3 With Stable Outlook

Moody's Ratings on Monday had maintained India's sovereign credit rating at Baa3. The agency also maintained a stable outlook for India.

In its latest report, Moody's said India's stable outlook reflects improving fiscal indicators since the pandemic. The agency further added that it also indicates a relatively resilient economic growth in comparison to other countries.

Moody's also noted that digitalisation, continued investments in infrastructure and financial sector reforms are what supported a steady recovery. However, the agency warned that rising geopolitical tensions could slow down growth and it could also push inflation higher.

The report added that India's GDP growth could moderate to around 6% in fiscal year 2027 in comparison to at estimated 7.3% in fiscal 2026. This is as external pressures weigh on the economy.

The agency also flagged concerns on inflation and Moody's has projected it to rise to 4.8% in fiscal 2027 from around 2.4% this year.

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The rating agency further said that disruptions in supplies, especially fertilisers and LPG could lead to higher fuel and transport costs that may eventually impact food prices as well. Moody's also noted that India's external position could come under pressure as Middle East, which accounts for nearly 40% of India's inward remittances, remains a key region.

Further any disruptions to jobs or economic activity could affect remittance flows and domestic demand in India. In addition, higher imports costs for energy and fertilisers could widen the current account deficit.

Moody's also added that on the fiscal front India's debt levels remain high. with government debt likely to stay above 80% of GDP in the medium term. With the central government targeting a deficit of 4.3% of GDP in fiscal 2027, only slightly lower than 4.4% in financial year 2026 as fiscal consolidation is likely to be gradual.

The agency said that while India's economic outlook remains stable and any improvement in debt levels and fiscal strength could support a future rating upgrade. Similarly, weaker growth or higher fiscal slippage could put pressure on the rating. Looking ahead, Moody's expects India's growth to see a modest recovery to around 6.2% in fiscal 2028, indicating a steady and cautious progress amid global uncertainties.

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