India's stable outlook is underpinned by the country's large and diverse economy, which has high growth potential, a relatively solid external position and a stable domestic financing base for debt. government. However, these strengths are counterbalanced by high overall government debt, weak debt servicing capacity and low per capita income, according to Moody's.
The agency highlighted India's ability to recover from the pandemic, noting significant progress in infrastructure development, digitalization and recovery of the financial system. This progress has fostered a stronger and more stable economy, although Moody's does not expect debt levels to fall significantly amid gradual fiscal consolidation next year. High domestic and global interest rates continue to pose challenges to debt affordability.
Moody's has affirmed India's ratings at Baa3 and P-3 with a stable outlook, citing strong economic growth potential in the face of fiscal challenges. The agency notes India's ability to recover from the pandemic and predicts 8% GDP growth in FY24. Despite high debt and interest rates, reform and digitalization efforts still deliver promising results. positive hope.
For the financial year 2023-24 (FY24), Moody's has revised India's real GDP growth forecast to 8%, on the back of strong gross fixed capital formation and the government's continued focus on infrastructure development. The rating agency expects India's economic growth to remain above 6% over the next two fiscal years, with potential risks from ongoing deflation and rising private investment.
Moody's expects India's debt coverage ratio to remain weak compared with Baa-rated emerging markets, due to the country's high debt burden and historically higher interest cost structure. Despite a rise in revenue supported by reforms such as the goods and services tax (GST) and digitalization efforts, debt servicing has worsened over the past decade, despite eased some since the peak of the pandemic.
India's credit profile reflects a combination of economic strength, institutional and governance progress, financing challenges and susceptibility to event risks, including political tensions and risks banking area. The country's low ESG credit impact score of 4 highlights its vulnerability to environmental and social risks, including climate change, drought and socioeconomic disparities.
Moody's stable outlook points to the possibility of gradual financial improvement amid a strong growth outlook. However, upward pressure on ratings is likely to increase with visible progress in fiscal consolidation, structural reform and economic diversification. Conversely, escalating political tensions, poor governance or renewed stress in the financial sector could put downward pressure on India's ratings.
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