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Rediff.com  » Business » Moody's may downgrade India

Moody's may downgrade India

July 10, 2009 18:25 IST
Global rating agency Moody's on Friday said that India's ratings may be downgraded if the government debt rises substantially, due to a lack of medium-term reforms and delay in privatization among others.

"...if the Indian government's debt finance-ability and its debt sustainability were to worsen-- due to a lack of medium-term reforms or delays in privatisation, or due to

large unexpected shocks-- then negative rating actions may follow, " Moody's Vice President and Senior Analyst Aninda Mitra said. He said the recent Budget announcement is in line with its stable outlook on India's ratings.

However, Mitra added that India's overall deficit is larger than the countries which are given the same ratings by Moody's.

"The overall deficit out-turn is larger than those of India's Baa- and Ba-rated peers, but it is at the same time based on conservative macro-economic assumptions, and still broadly consistent with the near-term stability in the government's debt trajectory," said Mitra.

The Centre's fiscal deficit is projected to widen to an 18-year high of 6.8 per cent of GDP in the current fiscal.

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