Moody's retains India's rating, mood not right for upgrade-The Total Investment & Insurance Solutions

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17 November 2016

Global credit rating agency Moody's Investors Service (Moody's) on Wednesday affirmed the Indian government's Baa3 issuer and senior unsecured ratings and maintained the positive outlook on the rating. The Total Investment & Insurance Solutions

Moody's has also affirmed India's P-3 short-term local currency rating.

Last week it was Standard and Poor's that affirmed its "BBB-/A-3" rating with stable outlook for India. The Total Investment & Insurance Solutions

In a statement, Moody's said: "We are affirming our 'BBB-' long-term and 'A-3' short-term sovereign credit ratings on India. The stable outlook balances India's sound external position and inclusive policy making tradition against the vulnerabilities stemming from its low per capita income and weak public finances." The Total Investment & Insurance Solutions

According to Moody's, maintaining a positive outlook on the Baa3 rating rather than assigning a stable outlook to the rating at either Baa3 or Baa2 is based on two drivers:

(a) Economic and institutional reforms introduced since the positive outlook was assigned earlier and potential further reforms, the reasonable expectation that India's growth will outperform that of its peers over the medium term and further improvement in India's macro-economic and institutional profits. The Total Investment & Insurance Solutions

(b) However, the government's reform efforts has not achieved the conditions that would support an upgrade to Baa2, in particular, in accelerating private investment to support high, stable growth without which the government's debt burden -- a key constraint on the rating -- is likely to remain high for a sustained period. The Total Investment & Insurance Solutions

Moody's said it would consider an upgrade upon evidence that institutional strengthening -- infrastructure improvement, revival in private investment, labour reforms, fiscal discipline, progress in implementation of bankruptcy law, resolution of bad loans and others -- will elicit sustained macro-economic stability, higher levels of investment and more favourable fiscal dynamics. The Total Investment & Insurance Solutions

According to Moody's, the positive outlook indicates that the likelihood of a rating downgrade is very low. The Total Investment & Insurance Solutions

"We could revise India's rating outlook to stable if economic, fiscal and institutional strengthening appeared unlikely, or banking system metrics remained weak or balance of payments risks rose," Moody's said.The Total Investment & Insurance Solutions