News & Notes

Moody’s Investors Service (“Moody’s”) downgraded the Government of India’s foreign-currency and local-currency long-term issuer ratings to “Baa3” from “Baa2”. It stated that the outlook remained “negative”.

The latest downgrade reduces India to the lowest investment grade of ratings and brings Moody’s — which is historically the most optimistic about India — ratings for the country in line with the other two main rating agencies in the world — Standard & Poor’s (S&P) and Fitch (see attached chart on the brief history of India’s sovereign rating).

What is the reason for this downgrade?

There are four main reasons why Moody’s has taken the decision.

1. Weak implementation of economic reforms since 2017

2. Relatively low economic growth over a sustained period

3. A significant deterioration in the fiscal position of governments (central and state)

4. And the rising stress in India’s financial sector

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