Moody’s Investors Service downgraded India’s ratings to “negative” from “stable”, on increasing risks of lower economic growth and reflecting lower government effectiveness at addressing long-standing economic and institutional weaknesses.
Moody’s in a release said: “Despite government measures to help reduce the depth and duration of India’s slowdown in economic growth, prolonged financial stress among rural households, weak job creation, and a credit crunch among non-bank financial institutions have increased the probability of a more entrenched slowdown. If nominal gross domestic product (GDP) growth does not return to higher rates, the government will face significant constraints in narrowing its budget deficit and preventing a rise in debt.”
However, Moody’s unchanged the foreign-currency and local-currency long-term issuer ratings of Baa2.
India’s economy grew only 5% year-on-year between April and June, its weakest pace since six years as consumer demand and government spending slowed amid global trade frictions.
Responding to the downgrading India said it continued to be among the fastest growing major economies in the world, India’s relative standing remains unaffected.
“India continues to be among the fastest growing major economies in the world, India’s relative standing remains unaffected.IMF in their latest World Economic Outlook has stated that Indian Economy is set to grow at 6.1% in 2019, picking up to 7 % in 2020. As India’s potential growth rate remains unchanged, assessment by IMF and other multilateral organizations continue to underline a positive outlook on India.”
The Finance Ministry over the past few weeks has undertaken a series of financial sector and other reforms to strengthen the economy but these reforms haven’t pleased rating agencies yet.