India’s heavy public debt is ‘constraint’ to higher rating: Moody’s
Moody’s Investors Service has said that India, the third-biggest economy in Asia, is failing to secure an investment-grade rating due to its heavy public debt.
Moody’s analyst Atsi Sheth said in a phone interview that India’s fiscal deficit and the debt burden was higher than those of similarly rated countries, adding that it was a big constraint to the country’s higher rating.
Speaking on the topic, Sheth said, “For the ratings to be improved, we will have to be comfortable that India’s government debt is at a level that can be sustained over the medium term.”
India’s finance ministry Pranab Mukherjee said on November 14 inclined for a higher rating during a meeting with the officials of ratings agency Moody’s.
But, the government previously announced its decision to make an increase of 32 per cent in its planned borrowing for the half year through March 31 because of lower-than-targeted revenue collections.
On October 4, Mr. Mukherjee had admitted that it might be hard for the government to achieve its target of cutting the budget deficit to a four-year low of 4.6 per cent of gross domestic product.
The yield on the government’s benchmark 10-year bond has increased 96 basis points to 8.88 per cent this year, as inflation continued to be out of control above 9 per cent. India’s central bank, the RBI, has raised borrowing costs as many as thirteen times starting March last year to tame inflation.
Ratings agencies Standard & Poor’s and Fitch have rated India’s local-currency debt at BBB- the lowest level in the investment category.
