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Moody's to keep India currency rating negative

International credit rating agency Moody's on Tuesday said it would continue to have a negative outlook on India's domestic currency rating due to high public deficit even as it indicated that the country's foreign currency rating would be revised upwards.

"The outlook on India's domestic currency rating would continue to be negative as the public deficit was very high," John Rutherford, CEO of Moody's Corporation, told the World Economic Forum in New Delhi.

He, however, cautioned that if the situation of public deficit does not change, the rating due for revision after 18 months would be downgraded.

Earlier this month, Moody's had indicated it could upgrade India's sovereign rating for foreign currency bonds, debt ceiling and bank deposits due to 'substantial strengthening of its external financial situation.'

But the Ba2 domestic currency bond rating of the government was not on review and that the outlook on this rating remains negative, it said.

Moody's said its ongoing analysis of India was focused on whether the fiscal problems facing the government could spill over into a balance of payments crisis, a linkage that would limit the difference between the foreign and domestic currency rating.

It said in a statement that it would review for possible upgrade of India's present ratings of 'Ba2' for foreign currency ceiling for debt and 'Ba3' foreign currency country ceiling for bank deposits.

It said the sovereign rating likely to be assigned for foreign currency denominated bond in the international capital markets will also be reviewed for possible upgrade.

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