Rating agency Moody’s Investor Service Friday cut its outlook on India’s ratings to negative from stable, but affirmed the investment grade Baa2 foreign-currency and local-currency long-term issuer ratings. The agency said prolonged financial stress among rural households, weak job creation, and a credit crunch among non-bank financial institutions (NBFIs), have increased the probability of a more “entrenched slowdown”. Lower nominal GDP growth would mean India will face significant constraints in lowering its fiscal deficit and debt burden, Moody’s said. The ratings agency also cut its outlook for 21 large companies, including State Bank of India, Indian Oil Corporation Ltd, Infosys Ltd and NTPC Ltd to “negative” from “stable”. Lowering of the sovereign credit outlook is a potential step towards an investment rating downgrade. India is now just two notches above non-investment grade country ratings on Moody’s scale. While Moody’s has maintained the country ratings and only lowered the outlook, it still poses risks of capital flight unless the government improves its fiscal health materially through aggressive stake sale in state-owned companies. The ratings agency also said it does not expect the credit crunch among non-bank financial institutions to be resolved quickly. Advertising The negative outlook also indicates that an upgrade is… Read full this story
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