InvestorQ : Will the rating downgrade by Moody’s actually impact India in a material way?
Khushi Patel made post

Will the rating downgrade by Moody’s actually impact India in a material way?

Answer
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Anjana Aiyar answered.
3 months ago


More than the current downgrade, India will have to be careful about a further downgrade into Junk Status. A weak rating will raise the cost of funds for Indian firms in the global market. The impact will also be felt on the INR. Any downgrade results in an immediate spike in selling in debt paper by the FPIs and weaken the rupee. The key now is to avoid further downgrades. Baa3 represents the lowest investment grade. Further downgrades will push India to junk status. Apart from the borrowing cost and rupee impact, it will have a big impact on FDI flows into India and could hinder Make in India plans. The focus must be on keeping a check on fiscal deficit. Further downgrades must be avoided at all costs.