The negative outlook reflects dominant, mutually-reinforcing, downside risks from deeper stresses in the economy and financial system that could lead to a more severe and prolonged erosion in fiscal strength than Moody's currently projects, the agency said.
Moody's Investors Service on Monday downgraded India's sovereign rating to 'Baa3' from 'Baa2', saying there will be challenges in implementation of policies to mitigate risks of a sustained period of low growth and deteriorating fiscal position.
"Moody's has today downgraded the Government of India's foreign-currency and local-currency long-term issuer ratings to Baa3 from Baa2.
"Moody's has also downgraded India's local-currency senior unsecured rating to Baa3 from Baa2, and its short-term local-currency rating to P-3 from P-2.
“The outlook remains negative," the agency said in a statement.
The negative outlook reflects dominant, mutually-reinforcing, downside risks from deeper stresses in the economy and financial system that could lead to a more severe and prolonged erosion in fiscal strength than Moody's currently projects, it added.
"The decision to downgrade India's ratings reflects Moody's view that the country's policy-making institutions will be challenged in enacting and implementing policies which effectively mitigate the risks of a sustained period of relatively low growth, significant further deterioration in the general government fiscal position and stress in the financial sector," the statement said.
'Baa3' is the lowest investment grade - just a notch above junk status.
Moody's had in November 2017, after a gap of 13 years, upgraded India's sovereign credit rating by a notch to Baa2 from Baa3.
