New Delhi: Bringing cheer to the Modi government, global rating agency Moody’s has retained India’s sovereign rating at Baa3 with stable outlook.
The rating agency said that the credit profile of India reflects key strengths including its large and diversified economy with high growth potential, a relatively strong external position, and a stable domestic financing base for government debt.
“We do not expect rising challenges to the global economy, including the impact of the Russia-Ukraine military conflict, higher inflation, and the tightening financial conditions on the back of policy tightening, to derail India’s ongoing recovery from the pandemic in 2022 and 2023,” Moody’s Investor Service said.
Moody’s noted that the stable outlook reflects its view that the risks from negative feedback between the economy and financial system are receding.
“With higher capital buffers and greater liquidity, banks and nonbank financial institutions (NBFIs) pose much less risk to the sovereign than we previously anticipated, facilitating the ongoing recovery from the pandemic.
“While risks stemming from a high debt burden and weak debt affordability remain, we expect that the economic environment will allow for a gradual narrowing in the general government fiscal deficit over the next few years, avoiding further deterioration in the sovereign credit profile,” the rating agency said.
The development has come days after the National Statistical Office (NSO) showed India’s gross domestic product (GDP) grew at 13.5 per cent during the April-June quarter of the current fiscal. Several high-frequency data such as monthly goods and services tax (GST) collection and manufacturing PMI have shown uptrend.