Rating agency Moody’s has affirmed India’s sovereign rating at BAA3, but raised the rating outlook to ‘positive’ from ‘stable’.
“The Baa3 rating incorporates the risk that higher levels of growth and infrastructure development will be accompanied by higher leverage.
Sovereign credit improvements over the next 12-18 months will depend on the extent to which growth, policies and buffers can contain the risks associated with rising leverage.
However it cautioned that unless the country’s banking system woes were resolved, its credit profile would remain constrained.
Moody’s view is that India’s policymakers are establishing a framework that will likely allow India’s growth to continue to outperform that of its peers over medium term and improve India’s macro economic, infra and institutional profile.
The rating agency said there was increasing probability that actions by policy makers will enhance the country’s economic strength, and by extension, the sovereign’s financial strength over coming years.