Moody’s Investor Service degrading India’s credit rating to only one level higher than a speculative level, and pointing out the prolonged slow-growth period, combined with rising debt and financial system stress are taking part into consideration. The downgrading from Baa2 to Baa3 was not directly caused by the pandemic impact but the outbreak and its control measure had amplified the existing fragile side of the country’s credit profile. A negative outlook was also indicated by Moody, noting the worsening government financial situation continues as the coronavirus persist and damaging the economy.
India’s recorded economy growth at 3.1% in the first quarter January-March, recorded slowest quarterly growth in the last eight years. Moody’s also predicts a contraction of 4% will last until the end of current fiscal year in March 2021 as a result of lockdown in April and May. Prime Minister Modi has announced steps to support the underprivileged and small businesses to survive the pandemic, but Moody’s commented the measures are not enough to push India’s growth rate back towards the 8%.
The Moody’s rating is in sync with Fitch and Standard and Poor’s as both placed India at the rates of BBB-, but both outlooks are pointing on stable than negative notes. The previous upgrade for India by Moody’s is from Baa3 to Baa2 in November 2017, distinguished as an endorsement of reforms movement by Prime Minister Narendra Modi’s.
