Moody’s Investors Service (MIS), an American credit rating agency 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 Investors Service (“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,” reads a statement issued by MIS.
“Baa3” is the lowest investment grade – just a notch above junk status.
The agency said decision to downgrade India’s ratings reflects Moody‘s view that the country’s policymaking 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.
Moody’s also lowered India’s long-term foreign-currency bond and bank deposit ceilings to Baa2 and Baa3, from Baa1 and Baa2, respectively.