The agency also maintained India’s sovereign credit rating at Baa3 with a stable outlook.
“The stable outlook reflects our view that the risks arising from the negative feedback between the economy and the financial system are receding. With higher capital buffers and greater liquidity, banks and non-bank financial institutions (NBFI) pose far less risk to the sovereign than previously anticipated, facilitating the ongoing recovery from the pandemic, “Moody’s said in a report.
“While the risks stemming from a high debt burden and weak debt accessibility remain, we expect the economic environment to allow for a gradual tightening of the general government budget deficit over the next few years, avoiding a further deterioration in the sovereign credit profile.” , according to the rating agency.
All three major global rating agencies – Moody’s, S&P and now Fitch – have stable prospects for India’s sovereign ratings, which offers comfort to politicians fighting to secure growth against the backdrop of geopolitical tensions.
Fitch Ratings previously revised India’s sovereign rating outlook to stable from negative, stating that downside risks to medium-term growth have eased due to rapid economic recovery and easing of financial sector weaknesses despite short-term headwinds from the global commodity price shock.
Moody’s said it expects inflationary pressures to weaken in the second half of 2022 and beyond in 2023, while high-frequency data shows strong and broad underlying momentum in the services and manufacturing sectors, according to survey data, such as SMEscapacity utilization, mobility, tax reporting and collection, business income and credit indicators.
“As such, we continue to see India as the fastest growing economy among its G20 peers in both 2022 and 2023,” according to the rating agency.
