REUTERS - Moody’s said on Tuesday that the outlook on its Baa3 rating for India is stable, in part due to the country’s high savings and investment rates, as debate rages in Delhi over whether the country can avoid credit downgrades from other rating agencies.
In its annual credit analysis on India, which Moody’s said does not constitute a rating action, the agency also cited the country’s large, diverse economy and strong gross domestic product growth as supportive of the rating.
However, Moody’s said: “The rating is constrained by the credit challenges posed by India’s poor social and physical infrastructure, high government deficit and debt ratios, recurrent inflationary pressures and an uncertain operating environment.”
Last month, Standard & Poor’s warned India still faced a one-in-three chance of a credit rating downgrade over the next 24 months, although it said a series of reform steps launched in September had slightly improved the country’s prospects.
Fitch also has a negative outlook on India.
Having faced a series of revenue-raising setbacks, the Indian government is grappling with a widening fiscal deficit that threatens to undermine the country’s credit standing and possibly trigger a downgrade to junk status.
Finance Minister P. Chidambaram has an ambitious target of holding the government’s fiscal deficit for 2012/13 at 5.3 percent of gross domestic product, even as sceptical private economists forecast a deficit closer to 6 percent.
Reporting by Ian Chua; Editing by Kim Coghill