Moody’s Investor Service upgraded the outlook on Indian local currency debt on Tuesday, December 15, 2009. However, the ratings remained unchanged. The outlook was turned from ‘stable’ to ‘positive’ at a rating of Ba2 (non-investment grade), in the wake of higher than expected GDP growth rate of 7.9% in the quarter ended September, 2009.
The improvement in the outlook is based upon the relative strength of the Indian economy, where the cyclic trends represent strength and sustainability. Government initiatives and regulatory measures have the strongest growth drivers in the economic recovery in India. This has translated into the Government debt holdings being viewed as more favorable for the banks. According to Moody’s, the Indian policy makers so far have been successful in formulating and implementing counter-cyclic policies, which is also likely to facilitate an easier exit strategy for the Government.
According to Moody’s sovereign analyst for India Mr. Aninda Mitra, “….the Indian economy has demonstrated its resilience to the global crisis and is expected to resume a high growth path with its underlying credit metrics relatively intact.” In addition, Moody’s revised the ratings on Indian banks’ foreign currency deposits from Ba1 to Ba2 to factor in, the Indian economy’s strong external position. As per the agency, the upgrade in the local currency outlook is also an indicator of a possible increase in the ratings over the next 12 months or so.
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