Global economic turmoil not to hit India's recovery: Moody's

New Delhi, September 6

India’s economic recovery is unlikely to be derailed by rising challenges to the global economy, higher inflation and tightening financial conditions, Moody’s Investors Service said on Tuesday, affirming a stable outlook for the country’s rating.

Affirms Stable outlook

• The global ratings agency has estimated a 6.3% GDP growth for the financial year 2023-24
• It rates India at Baa3, the lowest investment grade rating. In October last year, it revised upwards the rating outlook to stable from negative

Moody’s saw the Indian economy expanding by 7.6% in the current fiscal compared to 8.7% growth in the last financial year that ended on March 31. For 2023-24, it estimates a 6.3% GDP growth. It rates India at Baa3, the lowest investment grade rating. In October last year, it revised upwards the rating outlook to stable from negative.

“The credit profile of India reflects key strengths, including its large and diversified economy with high growth potential, a relatively strong external position, and a stable domestic financing base for government debt,” Moody’s said in a note.

Principal credit challenges include low per capita income, high general government debt, low debt affordability and limited government effectiveness.

“We do not expect rising challenges to the global economy, including the impact of the Russia-Ukraine military conflict, higher inflation, and the tightening financial conditions on the back of policy tightening, to derail India’s ongoing recovery from the pandemic in 2022 (FY2022-23) and 2023 (FY2023-24),” it said.

The stable outlook, it said, reflects its view that the risks from negative feedback between the economy and financial system are receding. “With higher capital buffers and greater liquidity, banks and non-bank financial institutions (NBFIs) pose much less risk to the sovereign than we previously anticipated, facilitating the ongoing recovery from the pandemic.