India's credit profile to face further pressure due to Covid-19: Moody's

Moody's rating on the government of India is Baa2 with negative outlook.

India's credit profile will face further pressures amid the coronavirus outbreak, according to rating agency Moody’s.

The shock will exacerbate an already material slowdown in economic growth, which has significantly reduced prospects for durable fiscal consolidation, Moody’s said in credit opinion.

Moody’s rating on the government of India is Baa2 with negative outlook.
India’s credit profile is supported by its large and diverse economy, and stable domestic financing base. This is balanced against high government debt, weak social and physical infrastructure, and a fragile financial sector.

The negative outlook reflects increasing risks that economic growth will remain significantly lower than in the past. This is in light of the deep shock triggered by the coronavirus outbreak.

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"The negative outlook reflects increasing risks that economic growth will remain significantly lower than in the past. This is in light of the deep shock triggered by the coronavirus outbreak, and partly reflects lower government and policy effectiveness at addressing longstanding economic and institutional weaknesses, leading to a gradual rise in the debt burden from already high levels," the agency said in its note.

The government measures to support the economy should help to reduce the depth and duration of India’s growth slowdown. However, prolonged financial stress among rural households, weak job creation and, more recently, a credit crunch among non-bank financial institutions (NBFIs) have increased the probability of a more entrenched weakening