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Indian economy can withstand potential shocks: Moody’s

Indian economy can withstand potential shocks: Moody’s
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First Published: Wed, May 14 2008. 03 51 PM IST
Updated: Wed, May 14 2008. 03 51 PM IST
PTI
New Delhi: Indian economy’s external fundamentals are strong enough to withstand a wide range of potential shocks and support its foreign currency sovereign and local currency bond ratings, says Moody’s.
Global rating agency Moody’s Investor Services in its latest report said the strong fundamentals, combined with upturn in savings and investment as well as rising rate of potential growth, supports the Indian government’s foreign currency sovereign medium investment grade (Baa3) bond rating and local currency speculative grade (Ba2) bond rating.
“The government’s local currency bond rating of Ba2 balances a high level of indebtedness with a favourable debt structure,” Moody’s Vice-President and author of the latest annual update on India Aninda Mitra said.
Meanwhile, the report notes that the Indian government’s Baa3 rating further reflects the country’s low external debt and strong external payments capacity.
“At the same time, concerns about the size and servicing burden of the government debt is somewhat mitigated by the latter’s high local currency content, long tenor, growing domestic savings and a stable creditor base dominated by domestic institutions,” Mitra, who is also a Sr Analyst, said.
However, a major challenge for the country’s physical, financial and social infrastructure is the weak government finances, he added.
Besides, the near-term macroeconomic challenges include maintaining monetary stability amid food and fuel price pressures, containing fiscal reversals and managing fiscal consequences after the implementation of hike in civil servants’ pay by 40%.
It also includes ensuring more “inclusive growth” that raises incomes in the poorer and slower-growing farm sector in a sustainable fashion.
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First Published: Wed, May 14 2008. 03 51 PM IST