Thursday, 14 January 2016

Fiscal Deficit Math Won’t Change India’s Sovereign Ratings: Says Moody’s

In World Economy News 15/01/2016

Global rating agency Moody’s Investors Service reiterated its view that India’s sovereign rating carries a positive outlook bucking the trend among similarly rated emerging market sovereigns. “India enters 2016 on the cusp of a cyclical growth recovery with inflation under control and the economy benefiting from lower commodity prices,” said Atsi Sheth, associate director, Moody’s, in a press conference.
According to Moody’s, India will remain one of the fastest growing large economies in 2016, but corporate profitability and inflation trajectory will decide India’s ability to maintain its sovereign rating and credit-rating outlook. The global rating agency has a ‘Baa3’ rating with a positive outlook on the country.
On the fiscal deficit, Moody’s said a slight upward or downward movement in the targeted fiscal deficit numbers will not do much for the ratings in the near term. Sheth pointed out that Moody’s didn’t change the rating upward when the fiscal deficit went down to 4 percent of GDP from 10 percent between FY03 and FY08.
“We did not do that because that projection was not policy-driven, but was growth-driven; it was very high nominal growth, very high corporate profitability and we did not think that it will be sustained.”
Stating that Moody’s looks more closely at the context of the widening or narrowing of fiscal deficits, she said “if deficit targets are missed because growth was lower and not because of delivered policy actions that set up liabilities in future years, we do take that into the account”.

Source: RTT News