"Fundamentals Remain Quite Robust": Government As Moody's Lowers Outlook

"Fundamentals Remain Quite Robust": Government As Moody's Lowers Outlook

This prompted a slew of rate cuts by the central bank, while the government rolled out several measures, including a sharp cut in corporate taxes, in a bid to boost growth.

After the corporate tax cuts and lower nominal GDP growth, Moody's now expects a government deficit of 3.7% of GDP in the fiscal year ending in March 2020, compared with a government target of 3.3% of GDP.

Responding to it, the FM said that it is aware that Moody's Investors Service has changed the outlook India's ratings to negative from stable while keeping the foreign-currency and local-currency long-term issuer ratings unchanged at Baa2.

India's growth outlook has deteriorated sharply this year, with a crunch that started out in the non-banking financial institutions (NBFIs) spreading to retail businesses, vehicle makers, home sales and heavy industries.

The slowdown "has been deeper and longer than anticipated", William Foster, vice president of Moody's Sovereign Risk Group, said in an interview with Bloomberg TV's Rishaad Salamat.

To avoid the scenario, the Centre must address fiscal deficit concerns.

At the interbank foreign exchange, the rupee opened at 71.26 then fell to 71.27 against the USA dollar, showing a decline of 30 paise over its previous closing.

The government on Friday reacted strongly to Moody's Investor Service changing its outlook on India's ratings to negative, saying the fundamentals of the economy remain quite robust and series of reforms undertaken recently would stimulate investments.

The lowering of outlook will put additional pressure on finance minister Nirmala Sitharaman to take more measures to kickstart the economy. Also, the Reserve Bank of India has already cut interest rates five times this year, though lenders have not passed on that easing to customers.

Moody's said it doesn't expect the credit crunch among non-bank financial institutions, which were the main source of consumer loans in recent years, to be resolved quickly.

The worldwide rating agency said that it estimates that the country's growth slowdown is in part long-lasting while backing its other ratings for India. However, S&P Global Ratings recently warned that "risks of contagion are rising in the Indian financial sector". India's relative standing remains unaffected, said the Finance Ministry in a statement in response to rating agency Moody's lowering India's outlook to "negative" from "stable". "There's a reasonable probability that that could happen, and this is a negative outlook so it gives them some time to play this out".