Ukraine will not be able to derail Indian economy, problems like war, inflation and expensive debt, Moody’s retains India’s rating

Photo:PTI Moody’s

The present time cannot be called good for the economies of the world. The Ukraine War has given the gift of inflation to the whole world. At the same time, due to the fear of recession and the strengthening of the dollar, many economies of the world have started to crumble. But despite these storms, the world’s trust in the Indian economy remains intact.

The world’s leading rating agency Moody’s Investors Service on Tuesday said it does not expect the Russia-Ukraine conflict, high inflation and dire financial conditions to derail India’s ongoing recovery from the pandemic in 2022 and 2023. . Simultaneously, Moody’s has retained its sovereign rating for India at Baa3 with a stable outlook. However, following the path of other rating agencies, Moody’s has definitely reduced India’s growth rate. Moody’s has cut its real GDP growth forecast for the year ending March 2023 to 7.6 percent.

Strong base of Indian economy

According to Moody’s, the stable outlook indicates that negative feedback between the economy and the financial system is reducing risks. The rating agency says, “With India’s strong foreign exchange reserves and high liquidity, banks and non-bank financial institutions (NBFIs) are exhibiting lower risks than ever before, adding that the pandemic recovery process is still ongoing. continues.’

India’s rating will improve further

Moody’s said it may upgrade the rating further if India’s economic growth picks up more than expected. This can happen only after the implementation of economic and financial sector reforms, which has led to a significant and steady increase in private sector investment. The steady decline in the debt burden of the government and improvement in its ability to bear the debt burden will also support the credit profile.

Credit profile shows strength

Moody’s says India’s credit profile reflects key strengths including its large and diversified economy, including its ability to grow rapidly, relatively strong external position and a stable domestic finance base for government debt. It added that the very large domestic market has delivered strong demand-driven growth, helping to shield the economy from volatility in external demand.

capital ratio in banks increased

The rating agency expects the quality of the Indian banking system to improve further as the economy emerges out of the pandemic. As this improves, conditions will become favorable for banks and this will strengthen business confidence. This will then improve the asset quality and benefits of the banking system. Capital ratio in both public and private banks has increased in the last one year

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