Moody’s raises India’s rating outlook from negative to stable (Baa3)

New Delhi, Oct 5 (EFE).- Credits rating agency Moody’s on Tuesday raised India’s rating outlook to stable (Baa3) from negative, assessing that the risks to the economy had reduced, especially for the financial system, as the impact of the pandemic and related effects had lessened.

“The decision to change the outlook to stable reflects Moody’s view that the downside risks from negative feedback between the real economy and financial system are receding,” the agency said in a statement.

“With higher capital cushions and greater liquidity, banks and non-bank financial institutions pose much lesser risk to the sovereign than Moody’s previously anticipated,” it added.

Moreover, the agency said that while risks remained due to a high sovereign debt burden, it expected that the “economic environment will allow for a gradual reduction of the general government fiscal deficit over the next few years, preventing further deterioration of the sovereign credit profile.”

Moody’s said that the improvement in India’s rating comes in the context of its sharp economic recovery and an expansion of economic activity across sectors.

After India’s GDP shrank 7.3 percent in the last fiscal year (April 2020 – March 2021) due to the effects of the pandemic, a total lockdown, unemployment and many sectors coming to a complete standstill, Moody’s now expects a sharp 9.3 percent growth for the current fiscal year, followed by 7.9 percent in the next cycle.

The agency said that the economic risks related to the pandemic were not the same as last year due to a “selective” use of restrictions when infections surged and the growing number of vaccinate people.

Indian authorities have so far administered 915 million vaccine doses, although just 250 million people have been fully vaccinated, while the target to fully inoculate the entire adult population of around 950 million remains far. EFE

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