- According to Moody’s, a Global Rating Agency, the Indian interim budget was supported with the policy assumptions that strengthen the government’s Baa3 rating and gave more stabled outlook.
- Moody’s stable outlook on the Baa3 sovereign rating of India includes the macro-economic risks laid by the govt’s high debt and deficit ratios. It also includes the recent efforts taken by the Govt. to deal with fiscal deficit through informal methods.
- It also incorporates the mid-term credit support given to the domestic savings, in order to finance the large borrowing requirements of the Govt.
- The new govt. will need to look into the long term fiscal trends. This will in turn impact the credit profile of the Indian Govt.
- Rating agencies like Moody’s, Fitch and S&P have constantly threatened to lessen the credit rating of India. This downgrade would most likely push the India’s sovereign rating to junk state & make the overseas borrowings costlier for the corporate world.
- As per Moody’s, the fiscal deficit ratios of India have dropped in the past two years, but the general fiscal deficits of Govt. remain higher. The subsidy bills are much higher than the budget, and thus it will negatively impact the exchange-rate fluctuations and commodity prices.
Exams Perspective:
- Global Rating Agencies
- Fiscal stability