Moody's warns India of 'poor debt affordability'

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New Delhi, May 28: In a new report released on Thursday, May 28 global rating agency, Moody's has notified that India's financial strength has deteriorated as a result of its 'poor debt affordability' and that the country's fiscal policy predictability and credibility are also facing the same situation.

Maintaining its stable outlook for its 'medium-grade' foreign and local currency ratings, Moody's said the 'stable outlook' has "recently faced growing pressure, mainly due to substantial deterioration in the fiscal position amid a rise in India"s dependence on foreign capital flows to drive its investment cycle."

It said that the country has to implement fiscal reforms like rationalisation of subsidies and reduction of price controls, as well as disinvestment in order to do away with poor fiscal fundamentals.

"These have been impeded in the previous five years of the Congress-led governing alliance by the fractious nature of India's politics and a populist impulse in policy formulation," Moody's said.

Moody's added that the Congress-coalition victory is a good development for the country's economy as the government will be free from 'obstructive left parties for parliamentary support'. It said that this outcome provides scope for rationalising spending, pushing ahead with disinvestments, and key reforms. And the government has to quickly outline and sustain a credible program for reducing consolidated deficits in order to improve the sustainability prospects for general government debt.

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