Moody's Says India Outlook Stable

W300

Global credit ratings agency Moody's said on Tuesday the outlook for India's investment grade credit rating was stable, partly thanks to high investment, sparking a jump in share prices.

Moody's said that the country's Baa3 ranking was underpinned by "strong economic growth" and investment in its annual credit analysis on India.

The news pushed up the Bombay Stock Exchange's benchmark 30 leading share Sensex index by 1.34 percent or 248.12 points to 18,785.13 points.

Moody's cited "credit strengths which include a large, diverse economy, strong GDP growth as well as savings, and investment rates that exceed emerging market averages".

But it also pointed to constraints including "India's poor social and physical infrastructure, high government deficit and debt ratios, recurrent inflationary pressures and an uncertain operating environment".

India's gross domestic product expanded at its slowest pace in three years in the second financial quarter, at 5.5 percent, down from near double-digit rates through much of 2005 to 2011.

India's Congress party-led government has since September introduced pro-market reforms to boost the investment climate and stem the fiscal deficit, but faces strong opposition in the country's unruly parliament.

"Given the delayed timing and still modest scope of these (reform) measures, growth may remain subdued in the near term amid continued domestic political uncertainty and a global slowdown," the report said.

The Moody's view contrasts with the outlooks of other global ratings agencies on India's prospects. Moody's said its report was an update for financial markets on India and did not constitute a "ratings action".

Last month Standard & Poor's warned India still faced at least a "one-in-three" risk of its credit rating being cut to junk status, although it said the country's outlook was slightly better as a result of the reforms.

Fitch also has a negative outlook on India.

India's investment grade rating is just one notch above "junk" status.