September 5, 2011
Moody's Issues Positive Outlook on India Local-Currency Debt
Moody's Investors Services affirmed its Baa3 rating for India's foreign currency government debt and its Ba1 rating for local currency debt in an annual credit analysis released Monday.
The ratings firm assigned a positive outlook to India's rupee-denominated bonds, saying it will consider a unified Baa3 rating for all bonds if India improves its fiscal position and its commitment to strengthening the domestic market. The outlook for foreign-currency debt is stable.
The report was upbeat about India's ability to weather a global economic downturn. "While it is not immune to an international growth slowdown, the strength of domestic demand and the diversity of the economy provides a buffer against a deceleration in globally exposed sectors," the report said.
It noted that India's foreign currency reserves equal four times its foreign debt obligations.
A debt-to-GDP ratio of 71% is cause for concern, as interest on this debt eats up 25% of India's revenues annually. However, "Moody's expects that continued GDP growth and incremental fiscal consolidation efforts will continue to lower the government debt/GDP ratio," the report said.
