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India rating downgraded by Moody

  • Category
    Economy
  • Published
    9th Jun, 2020

Moody’s Investors Service (“Moody’s”) downgraded the Government of India’s foreign-currency and local-currency long-term issuer ratings to “Baa3” from “Baa2”. It stated that the outlook remained “negative”.

Context

Moody’s Investors Service (“Moody’s”) downgraded the Government of India’s foreign-currency and local-currency long-term issuer ratings to “Baa3” from “Baa2”. It stated that the outlook remained “negative”.

Background

  • In November 2017, Moody’s had upgraded India’s rating to “Baa2” with a “stable” outlook.
  • At that time, it expected that “effective implementation of key reforms would strengthen the sovereign’s credit profile” through a gradual but persistent improvement in economic, institutional and fiscal strength.
  • But those hopes were belied. Since that upgrade in 2017, implementation of reforms has been “relatively weak and has not resulted in material credit improvements, indicating limited policy effectiveness,”.
  • In November 2019, Moody’s changed the outlook on India’s Baa2 rating to “negative” from “stable” precisely because these risks were increasing.
  • Since many of the apprehensions that it had in November 2019 have come through, Moody’s has downgraded the rating to “Baa3” from “Baa2”, while maintaining the negative outlook.
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