Credit ratings agency Moody’s, which lowered the outlook for Indian banking system, will hold consultations with finance ministry officials next week as part of the exercise to review the country’s sovereign rating.
“We are meeting Moody’s on Monday (14 November) to discuss India’s sovereign credit rating,” a senior finance ministry official said. The meeting is being held at a time when the Indian economy is passing through a rough patch. As per the Reserve Bank of India (RBI), the growth rate during the current fiscal is expected to moderate to 7.6% from 8.5% last year.
The officials are likely to talk about the steps the government has been taking to reduce the fiscal deficit, reform the direct and indirect taxation systems and recapitalise the banking sector.
The economy has been braving high inflation and the Centre’s fiscal deficit may exceed the budget estimate of 4.6% in view of poor tax collection and low realisation from sale of government equity in state-owned companies.
Moody’s has assigned Baa3, the lowest investment grading rating, to India. The rating agency yesterday downgraded the outlook for the Indian banking system to “negative” from “stable” saying that economic slowdown would impact asset quality, capitalisation and profitability.
However, differing with the downgrade accorded by Moody’s, ratings agency Standard & Poor’s today upgraded the Indian banking sector saying its domestic regulations are in line with international standards. Ratings are significant as they help the country and other entities to borrow funds globally at competitive rates.