Amidst the economic slowdown, India is hit by another bad news that can worsen the economic stagnation. Rating agency Moody’s have has lowered India’s rating from “stable” to “negative”.
November 8, 2016: Demonetisation
November 8, 2019: "India’s credit ratings outlook was cut to negative by Moody’s Investors Service, the first step toward a downgrade, as concerns mount the economic slowdown will be prolonged and debt will rise."https://t.co/sfusrrpVY8— Somesh Jha (@someshjha7) November 8, 2019
The ratings were lowered following the concern that the government would not be able to revive the stunted economy. Moody pointed out that the growing debt burden and the failure of the government to narrow down budget deficit are two prominent reasons for the fall in India’s rating.
India’s foreign issuer rating was lowered to Baa2 which is the second-lowest investment grade score. Moody’s in an official statement questioned the efficacy of the Indian government by highlighting the rural financial stress and low job creation.
“Financial stress, especially in rural areas, and low job creation calls into question how effective the nation’s government is in addressing economic sluggishness”, wrote William Foster, vice president of Moody’s Sovereign Risk Group.
He further explained that “A prolonged period of slower economic growth would dampen income growth and the pace of improvements in living standards, and potentially constrain the policy options to drive sustained high investment growth over the medium to long term”.
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The fall in ratings puts further pressure on the Indian economy which is trying to get back on track through measures like corporate tax cuts. The Foreign Investments would be affected as a result of fall down in ratings as the global ratings are watched closely by investors. India maintains a stable outlook in Fitch Ratings and S&P Global as of now.