Moody’s downgrades India’s rating

June 02, 2020 12:00 am | Updated 04:23 am IST - Mumbai

Rating agency Moody’s downgraded India’s foreign currency and local currency long term issuer ratings to Baa3 from Baa2, while maintaining a negative outlook, citing prolonged period of low growth and further deterioration in the government’s fiscal position.

Moody’s said the negative outlook reflects dominant, mutually-reinforcing, downside risks from deeper stresses in the economy and financial system that could lead to a more severe and prolonged erosion in fiscal strength.

Lowest grade

Baa3 is the lowest in investment grade in Moody’s rating ladder. This means, India is just one notch above the non-investment grade or junk grade.

The rating agency expects the country’s GDP to contract by 4% in the current financial year due to the shock from the pandemic and related lockdown measures. The GDP growth, however, is expected to pick up in the next fiscal to 8.7% and closer to 6% in the year after.

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