In a damning indictment of Prime Minister Narendra Modi’s development agenda and carefully crafted ‘Vikas Purush’ image, Moody’s, the international investment ratings agency, has downgraded India’s sovereign rating to Baa3 negative, just a notch above a complete junk rating.
According to Moody’s, “India’s policymaking institutions will face challenges in enacting and implementing policies that effectively mitigate risks of sustained low growth, further fiscal deterioration and financial sector stress.” Thus, growth and debt challenges seem to be driving this downgrade. Moody’s also sited “weak infrastructure, rigidities in labor, land and product markets, and rising financial sector risks” as challenges before the Indian economy.
Moody’s was founded by John Moody in 1909 to produce manuals of statistics related to stocks and bonds and bond ratings. In Moody’s Investors Service’s ratings system, securities are assigned a rating from Aaa to C, with Aaa being the highest quality and C the lowest quality.
According to Nasdaq, Baa3 is “The lowest rating of investment grade Moody’s Long-term Corporate Obligation Rating. Obligations rated Baa3 are subject to moderate credit risk. They are considered medium grade and as such may possess certain speculative characteristics.”
In November last year, Moody’s had changed India’s outlook from ‘stable’ to ‘negative’. Standard & Poor’s had assigned India a BBB- rating. As of March 2020, S&P stuck to rating India at BBB- with stable outlook.