Moody’s lowers India’s outlook to ‘negative’ from ‘stable’: Fundamentals of economy remain robust with inflation under check, says FinMin

The government said India continues to be among fastest growing major economies. India’s relative standing remains unaffected, said the Finance Ministry in a statement in response to rating agency Moody’s lowering India’s outlook to ‘negative’ from ‘stable’. The government on Friday reacted strongly to Moody’s Investor Service changing its outlook on India’s ratings to negative, saying the fundamentals of the economy remain quite robust and series of reforms undertaken recently would stimulate investments, a PTI report said. In a statement soon after Moody’s lowered the outlook to negative from stable, the Finance Ministry said India continues to be among the fastest-growing major economies in the world.

Fin Min responds to Moody's change in India outlook to negative from stable pic.twitter.com/J14NwAovDE

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“The fundamentals of the economy remain quite robust with inflation under check and bond yields low. India continues to offer strong prospects of growth in the near and medium-term,” the Finance Ministry said. [caption id=“attachment_4391191” align=“alignleft” width=“380”]  Representational image. Reuters.[/caption] Moody’s Investors Service has changed the outlook on India’s ratings to ‘negative’ from ‘stable’, saying there was an increasing risk that economic growth would remain materially lower than the past. It affirmed the Baa2 foreign-currency and local-currency long-term issuer ratings for India. The Finance Ministry quoted International Monetary Fund’s (IMF) latest World Economic Outlook, which said the Indian economy is set to grow at 6.1 percent in 2019, picking up to 7 percent in 2020. In April, the IMF had said India will grow at 7.3 percent in 2019. However, three months later it projected a slower growth rate for India in 2019, a downward revision of 0.3 percent. “As India’s potential growth rate remains unchanged, assessment by IMF and other multilateral organizations continue to underline a positive outlook on India,” the statement read.

“Moody’s decision to change the outlook to negative reflects increasing risks that economic growth will remain materially lower than in the past, partly reflecting lower government and policy effectiveness at addressing long-standing economic and institutional weaknesses than Moody’s had previously estimated, leading to a gradual rise in the debt burden from already high levels,” the rating agency said in a statement. While government measures to support the economy should help to reduce the depth and duration of India’s growth slowdown, prolonged financial stress among rural households, weak job creation, and, more recently, a credit crunch among non-bank financial institutions (NBFIs), had increased the probability of a more entrenched slowdown, it said. “Moreover, the prospects of further reforms that would support business investment and growth at high levels, and significantly broaden the narrow tax base, have diminished,” it said. --With PTI inputs