NEW DELHI: US-based rating agency Moody’s Investors Service on Friday flagged the shrinking space for civil society and political dissent, and rising sectarian tensions in India, while affirming the country’s credit rating at the lowest investment grade of ‘Baa3’ with a stable outlook.
Moody’s said it believes India’s economy will grow rapidly compared to international standards, although potential growth has decreased in the last 7-10 years.
"Although elevated political polarisation is unlikely to lead to a material destabilization of government, rising domestic political tensions suggest an ongoing risk of populist policies amid the prevalence of social risks such as poverty and income inequality, as well as inequitable access to education and basic services,” it added.
According to the rating agency, India’s high GDP growth will lead to rising income levels and overall economic resilience, which will support fiscal consolidation and government debt stabilization. Moody’s expects India’s economic growth to outpace all G20 economies for the next two years, driven by domestic demand. However, it feels India’s potential growth of 6- 6.5% remains lower than estimates.
High debt burden
The rating agency highlighted the risks associated with India’s high debt burden and weak debt affordability, especially in the face of lasting upward shifts in global and domestic interest rates