TEXT-Moody's says India's fundamentals support Baa3/Ba2 ratings

(The following statement was released by the rating agency)

May 14 - Moody's Investors Service says in a new report that
the Indian economy's external fundamentals are strong enough to
withstand a wide range of potential shocks, including sudden
reversals in short-term capital flows, a sharp slowdown in global
growth, and weak government finances, or a slowing in structural
reforms on account of a fractious political landscape.

The Moody's report says that the strong fundamentals,
combined with a private-sector induced upturn in savings and
investment and a rising rate of potential growth, support the
Indian government's foreign currency sovereign bond rating of
Baa3 and local currency bond rating of Ba2.

"The government's local currency bond rating of Ba2 balances
a high level of indebtedness with a favorable debt structure,"
says Aninda Mitra, a Moody's VP/Senior Analyst and author of the
report, the rating agency's latest annual update on India.

"At the same time, concerns about the size and servicing
burden of the government debt is somewhat mitigated by the
latter's high local currency content, long tenor, growing
domestic savings and a stable creditor base dominated by domestic
institutions," adds Mitra.

Meanwhile, the report notes that the Indian government's Baa3
rating further reflects the country's low external debt and
strong external payments capacity -- which compare favorably with
most Baa-rated countries.

"However, weak government finances, though improving, are
still a constraint on the country's physical, financial and
social infrastructure," says Mitra.

The stable outlook on the foreign and local currency
government ratings reflects Moody's view that along with a large
and well-diversified economy, reasonably adequate policy
framework should help to contain several near-term macroeconomic
challenges. Foremost among these challenges are:

Maintaining monetary stability amidst food and fuel price
pressures, large capital inflows and various supply-side
rigidities Containing fiscal reversals in the run-up to scheduled
(or possibly early) elections

Managing fiscal consequences after the implementation of a
retroactive hike in civil servants' pay by as much as 40%

Ensuring more "inclusive growth" that raises incomes in the
poorer and slower-growing farm sector in a sustainable, though
prudent, fashion
Moody's: India Annual Report' can be found at www.moodys.com.