Moody’s: Moody’s maintains India’s sovereign rating at ‘Baa3’, said this about growth.

Rating agency Moody’s has given good news about India on Friday. The agency has expressed hope that India’s economic growth will outpace all other G-20 economies for at least the next two years due to strong domestic demand. It retained India’s sovereign rating at ‘Baa3’ and said higher growth would support a gradual rise in income levels, which would further contribute to economic strength.

Moody’s Investors Service today affirmed the Government of India’s long-term local and foreign currency issuer ratings and local currency unsecured ratings at Baa3, it said in a statement. Moody’s has also retained India’s other short-term local currency rating at P-3. Outlook remains stable. Baa3 is the lowest investment grade rating.

All the three global rating agencies Fitch, S&P and Moody’s have assigned the lowest investment grade rating on India with a stable outlook. The rating is viewed by investors as a barometer of a country’s creditworthiness and affects the cost of borrowing. However, it added that while potential growth has moderated in the last 7-10 years, the Indian economy is likely to continue to grow at a rapid pace by international standards.

Higher GDP growth will contribute to gradually rising income levels and overall economic resilience, Moody’s said. In turn, this would support orderly fiscal consolidation and government debt stabilisation, but at a higher level. In addition, the financial sector continues to strengthen, thereby mitigating economic and contingent liability risks.

Populist policies can get a boost

Issues related to politics in the country can have an impact further. Political rivalry can promote policies that are populist. Risks related to violence in some parts of the country, income disparity, poverty and even border tensions remain ahead.