India’s Sovereign Rating Cut at Moody’s Citing Policy Risks

India’s credit rating was cut to the lowest investment grade by Moody’s Investors Service, citing policy challenges in addressing a prolonged slowdown and the government’s deteriorating fiscal position, Bloomberg News reported. The nation’s long-term foreign-currency credit rating was cut to Baa3 from Baa2, according to a statement. The outlook remains negative. “The negative outlook reflects dominant, mutually-reinforcing, downside risks from deeper stresses in the economy,” Moody’s said. The stress also to the financial system “could lead to a more severe and prolonged erosion in fiscal strength than Moody’s currently projects.” India missed its fiscal deficit target for the year ended March even before the worst of the coronavirus hit the economy, with economists seeing the budget sliding deeper into the red this year. That’s leading to calls for the central bank to directly monetize the deficit. Read more