Moody's Investors Service on Tuesday changed its outlook on India's sovereign ratings to stable from negative. However, it retained the ratings, both on foreign and domestic currencies, at the lowest investment grade. Experts said this would have a beneficial impact on debt allocations by foreign portfolio investors (FPIs) to Indian papers.
"The decision to change the outlook to stable reflects Moody's view that the downside risks from negative feedback between the real economy and financial system are receding," said the ratings agency.
Now, Moody's and Standard & Poor's have a stable outlook on their ratings on India, while Fitch still has a negative outlook. All three rating agencies have given India the lowest investment grade.
Chief Economic Advisor Krishnamurthy Subramanian told Business Standard that there was ample scope for further re-calibration in Moody's assessments with several reforms implemented in the financial sector and the prospects for the sector looking better. "It (Moody's action) is a positive development that incorporates our consistent assessment about the strong fundamentals of the Indian economy," he said.
The development came close on the heels of finance ministry officials pitching for a ratings upgrade during a meeting with Moody's on September 30. The agency has now partly accepted the request. Moody's had said in the meeting that while India's fiscal or financial strength, including its debt profile, had materially decreased, it had become less susceptible to event risks.
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