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Moody’s upgrades India’s growth outlook from negative to ‘stable’, says risk reduced at the level of banks

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Indian officials had a meeting with Moody’s representatives last week (file photo)

Last Tuesday, officials of the Finance Ministry and representatives of rating agency Moody’s discussed the prospects of economic growth. During the meeting, Indian officials had advocated for improving India’s sovereign rating before Moody’s.

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  • Updated On – 8:38 pm, Tue, 5 October 21Edited By: Saket Anand
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Rating agency Moody’s has upgraded the country’s growth outlook from ‘negative’ to ‘stable’ while maintaining India’s government credibility. The agency cited a reduction in the risk of a downturn in the economy and financial system to improve the outlook. Moody’s has still rated India’s sovereign rating as ‘Baa3’, which is the lowest investment grade.

Moody’s Investor Services said in a statement on Tuesday, “We have revised our outlook on the credibility of the Government of India from negative to stable. At the same time, the country’s foreign exchange and local currency long term issuer rating and local currency rating (Senior Unsecured) have been retained at Baa3.

The rating agency said, “With improved capital and liquidity conditions, risks at the level of banks and non-banking financial institutions have been reduced as compared to earlier estimates. Risk remains due to high debt burden and weak debt servicing position. But Moody’s expects that the economic environment will be helpful in gradually reducing the fiscal deficit of the central and state governments over the next few years. This will prevent further deterioration in the credibility of the government.

Meeting with Moody’s representatives last week

Last Tuesday, officials of the Finance Ministry and representatives of rating agency Moody’s discussed the prospects of economic growth. During the meeting, Indian officials had advocated for improving India’s sovereign rating before Moody’s. The meeting was attended by Chief Economic Advisor KV Subramaniam and officials from the Department of Economic Affairs and Moody’s analysts.

During the meeting, the Finance Ministry officials mentioned the rapid GDP (Gross Domestic Product) growth rate in the quarter ended June 2021. Also shared the figures of fiscal deficit and debt. The fiscal deficit of the Center during April-July, 2021 was 21.3 percent of the budgeted estimate for the financial year 2021-22. The main reason for this is reduction in non-essential expenses and increase in tax and non-tax revenue collection. The fiscal deficit had reached 103 per cent of the annual target in the corresponding period of the last financial year.

Moody’s Investor Service downgraded India’s government credentials from ‘Baa2’ to ‘Baa3’ last year. It had said that there will be challenges in the implementation of policies to maintain the low growth rate and mitigate the risks of deteriorating fiscal situation. Moody’s had kept the growth outlook negative.

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Shehnaz is a Corporate Communications Expert by profession and writer by Passion. She has experience of many years in the same. Her educational background in Mass communication has given her a broad base from which to approach many topics. She enjoys writing about Public relations, Corporate communications, travel, entrepreneurship, insurance, and finance among others.

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Shehnaz Ali
Shehnaz is a Corporate Communications Expert by profession and writer by Passion. She has experience of many years in the same. Her educational background in Mass communication has given her a broad base from which to approach many topics. She enjoys writing about Public relations, Corporate communications, travel, entrepreneurship, insurance, and finance among others.

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