InvestorQ : What was the reason for Moody’s suddenly downgrading India ratings lower?
Arya Nanda made post

What was the reason for Moody’s suddenly downgrading India ratings lower?

Answer
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diksha shah answered.
3 months ago


The downgrade was surprising but not entirely unexpected. Moody’s downgraded India’s sovereign rating to Baa3 from Baa2, citing worsening fiscal situation and major challenges to growth in the coming quarters. Baa3 is the lowest investment grade and is just one notch above Junk Status. It may be recollected that in November 2017 Moody’s was the only international rating agency to upgrade India ratings from Baa3 to Baa2, while S&P and Fitch had opted for status quo. This downgrade could have an impact on the cost of foreign currency borrowings for Indian companies. However, the growth and fiscal deficit situation is a global phenomenon. India does not have a choice but needs to push growth. Moody’s wants Indian economy to grow but fiscal deficit to remain low. That is obviously not practical. Markets may react negatively for a day or two but would then forget about it.