Moody’s downgrades India’s outlook to 'negative' from 'stable'

International ratings agency Moody's Investors Service has downgraded India's credit ratings to 'negative' from 'stable' on concerns that country's economic growth will remain materially lower than it was in the past.

“Moody's decision to change the outlook to negative reflects increasing risks that economic growth will remain materially lower than in the past, partly reflecting lower government and policy effectiveness at addressing long-standing economic and institutional weaknesses than Moody's had previously estimated, leading to a gradual rise in the debt burden from already high levels,” the global rating agency said.

“...the prospects of further reforms that would support business investment and growth at high levels, and significantly broaden the narrow tax base, have diminished,” the agency said in a statement.

If nominal GDP growth does not return to high rates, Moody's expects that the government will face very significant constraints in narrowing the general government budget deficit and preventing a rise in the debt burden.

(with news agency inputs)