Moodys-rating-india

Moody’s said there was increasing probability that actions by policy makers will enhance the country’s economic strength and sovereign’s financial strength over coming years.

Rating agency Moody’s has affirmed India’s sovereign rating at BAA3, but raised the rating outlook to ‘positive’ from ‘stable’. However it cautioned that unless the country’s banking system problem were resolved, its credit profile would remain stretched. Moody’s view is that India’s policymakers are establishing a framework that will likely allow India’s growth to continue to outperform that of its peers over medium term and improve India’s macro economic, infra and institutional profile.

The rating agency said there was increasing probability that actions by policy makers will enhance the country’s economic strength and by extension, the sovereign’s financial strength over coming years. The rating incorporates credit strengths such as diversified economy, robust growth prospects, relatively high domestic savings rate, high international reserve buffers. It also reflects India’s weaker performance relative to peers on fiscal, inflation and infrastructure related metrics. “While policies are beginning to address each of these factors, the extent of likely improvement is as yet unclear,” said the Moody’s release, adding that India’s banking system’s asset quality, loan loss coverage and capital ratios were relatively weak “This poses sovereign credit risks because of banking sector’s role in financing growth as well the government’s deficit through its purchase of government securities and the contingent liabilities due to government’s ownership of a major portion of banking sector,” the release said.

April 9, 2015
Moodys-rating-india

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