Moody's cuts India's outlook to 'negative' over concerns of slowing economic growth

Galtero Lara
Noviembre 8, 2019

Moody's Investors Service on Thursday cut India's ratings outlook to "negative" from "stable", citing increasing risks that growth in Asia's third-largest economy will remain lower than in the past.

This prompted a slew of rate cuts by the central bank, while the government rolled out several measures, including a sharp cut in corporate taxes, in a bid to boost growth. Moody's is projecting a budget deficit of 3.7 per cent of gross domestic product in the year through March 2020, a breach of the government's 3.3 per cent target.

The rating company affirmed the nation's foreign issuer rating at Baa2, the second-lowest investment grade score.

The slowdown "has been deeper and longer than anticipated", William Foster, vice president of Moody's Sovereign Risk Group, said in an interview with Bloomberg TV's Rishaad Salamat. It opened lower by 34 paise at 71.30 per dollar versus previous close 70.96.

The government added that the fundamentals of the economy remained robust, with inflation under check and bond yields low and that India continued to offer strong prospects of growth in the near and medium term.

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The Government has undertaken a series of the financial sector and other reforms to strengthen the economy as a whole.

"India's relative standing remains unaffected", the Finance Ministry said in a statement.

The downgrade to the outlook puts additional pressure on authorities to kickstart the economy, although they have limited room to move.

The report added that it does not expect the credit crunch among NBFIs, major providers of retail loans in recent years, to be resolved quickly. "If the government is able to maintain discipline and mitigate spending by doing more privatizations that could help allay these concerns".

Moody's Investors Service, the investor-focussed arm of ratings agency Moody's, has downgraded its outlook on India to "negative" from "stable".

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