Moody’s downgrades India’s sovereign rating, maintains negative outlook

New Delhi, June 01: Moody's Investors Service on Monday downgraded India's sovereign rating to 'Baa3' from 'Baa2', saying there will be challenges in implementation of policies to mitigate risks of a sustained period of low growth and deteriorating fiscal position.

"Moody's has today downgraded the Government of India's foreign-currency and local-currency long-term issuer ratings to Baa3 from Baa2. "Moody's has also downgraded India's local-currency senior unsecured rating to Baa3 from Baa2, and its short-term local-currency rating to P-3 from P-2. The outlook remains negative," the agency said in a statement.

The negative outlook reflects dominant, mutually-reinforcing, downside risks from deeper stresses in the economy and financial system that could lead to a more severe and prolonged erosion in fiscal strength than Moody's currently projects, it added.

"The decision to downgrade India's ratings reflects Moody's view that the country's policy-making institutions will be challenged in enacting and implementing policies which effectively mitigate the risks of a sustained period of relatively low growth, significant further deterioration in the general government fiscal position and stress in the financial sector," the statement said.

'Baa3' is the lowest investment grade - just a notch above junk status.

Moody's had in November 2017, after a gap of 13 years, upgraded India's sovereign credit rating by a notch to Baa2 from Baa3.