Moody’s warns India could be headed for debt trap and recessionary phase

New Delhi: Moody’s Investors Service has downgraded its outlook on India’s ratings to “negative” from “stable”, attributing increasing risks that the country’s economic growth will remain lower than in the past.

Government responded to the downgrading saying India continues to be among the fastest growing major economies in the world, India’s relative standing remains unaffected.

The outlook partly reflects government and policy ineffectiveness in addressing economic weakness, which led to an increase in debt burden from already high levels, the ratings agency said on Thursday.

At a six year low, India’s economy grew only 5 per cent year-on-year between April and June, its weakest pace since 2013, as consumer demand and government spending slowed amid global trade frictions.

The international ratings agency said it estimates that the country’s growth slowdown is in part long-lasting while backing its other ratings for India.

Government of India has noted that Moody’s Investors Service has changed the outlook on the Government of India’s ratings to negative from stable while keeping the foreign-currency and local-currency long-term issuer ratings unchanged at Baa2.

However, India continues to be among the fastest growing major economies in the world, India’s relative standing remains unaffected, the government said.

IMF in their latest World Economic Outlook has stated that Indian Economy is set to grow at 6.1 per cent in 2019, picking up to 7 per cent in 2020.

As India’s potential growth rate remains unchanged, assessment by IMF and other multilateral organizations continue to underline a positive outlook on India, the Finance Ministry said.

The Government has undertaken a series of financial sector and other reforms to strengthen the economy as a whole. Government of India has also proactively taken policy decisions in response to the global slowdown. These measures would lead to a positive outlook on India and would attract capital flows and stimulate investments, it said

The fundamentals of the economy remain quite robust with inflation under check and bond yields low. India continues to offer strong prospects of growth in near and medium term, the Finance Ministry added.

Published on: Nov 8, 2019 at 11:00 IST

IANS