NEW DELHI: In first official comments since Moody’s Investors Service downgraded the country’s rating and S&P retained it at the lowest investment grade, Chief Economic Advisor Krishnamurthy Subramanian Thursday said India’s economy will witness a decline in the current fiscal, but the drop will be limited if there is an economic recovery in the October-March period.
“What is uncertain though is whether the recovery will happen in the second half of the year or in the next year and therefore the actual growth will depend critically on when the recovery happens. If recovery does not happen this year, the economy will basically have a decline in output and suppose in the second half there is a recovery, that may be limited,” he said.
Subramanian felt the country’s fundamentals demand a much better rating. “India’s ability and willingness to repay debt is gold standard,” he said while making a case for ratings upgrade.
Moody’s Investors Service on Monday downgraded India’s rating to Baa3, one notch to the lowest grade, citing challenges in the implementation of policies, deteriorating fiscal position, and stress in the financial sector, maintaining a negative outlook.
“The decision to downgrade India's ratings reflects Moody's view that the country's policymaking institutions will be challenged in enacting and implementing policies which effectively mitigate the risks of a sustained period of relatively low growth, significant further deterioration in the general government fiscal position and stress in the financial sector,” the rating agency said in its statement.
Congress leader Rahul Gandhi on Monday took a jibe at Prime Minister Narendra Modi over Moody's Investors Service downgrading India's sovereign rating to the lowest investment rate and said that the global rating agency has rated his handling of the country's economy "a step above junk".