Rating agency Moody’s said that the the negative outlook of India reflects increasing risks that economic growth will remain significantly lower than in the past.
“This is in light of the deep shock triggered by the coronavirus outbreak , and partly reflects lower government and policy effectiveness at addressing long-standing economic and institutional weaknesses, leading to a gradual rise in the debt burden from already high levels,” Moody’s said.
The rating agency said while the government measures to support the economy should help reduce the depth and duration of India’s growth slowdown, prolonged financial stress among rural households, weak job creation and credit crunch among non-bank financial institutions (NBFIs) have increased the probability of a more entrenched weakening.
The negative outlook indicates that an upgrade is unlikely in the near term, Moody’s said.
It said a change the rating outlook can happen if there is a significant increase in the probability of fiscal metrics stabilizing and strengthening over time.
“A downgrade of India’s rating would likely occur if we expected its fiscal metrics to weaken materially. This would probably happen in the context of a prolonged or deep slowdown in growth, with only limited prospects that the government would be able to restore stronger output through economic and institutional reforms,” Moody’s said.
