Moody’S Upgrade Sovereign Credit Rating of India to Baa2 from Baa3 (Download PDF)

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Moody’s Investors Service upgraded the Government of India’s local and foreign currency issuer ratings to Baa2 from Baa3 and changed the outlook on the rating to stable from positive.

Image of Moody’s Rating System

Image of Moody’s Rating System

Image of Moody’s Rating System

  • India’s rating has been upgraded after a period of 13 years.

  • India’s sovereign credit rating was last upgraded in January 2004 to Baa3 (from Ba1).

Why Was Rating Increased?

  • Recognition of major economic and institutional reforms like:

  • Introduction of Goods and Services Tax (GST)

  • Putting in place monetary policy framework

  • Measures taken to address recapitalization of public sector banks

  • Measures to bring formalization and digitalization in the economy - demonetization, the Aadhaar system of biometric accounts and targeted delivery of benefits through the Direct Benefit Transfer (DBT)

  • Government’s commitment to macro stability leading to low inflation, declining deficit and balance

  • Government’s fiscal consolidation programme resulting in a reduction of fiscal deficits from 4.5 % of GDP in 2013 - 14 to 3.5 % in 2016 - 17.

  • Fiscal consolidation.

What is Moody’s?

  • Moody’s Investors Service, often referred to as Moody’s, is the bond credit rating business.

  • Moody’s, along with Standard & Poor’s and Fitch Group, is considered one of the Big Three credit rating agencies

  • Company ranks the creditworthiness of borrowers using a standardized ratings scale which measures expected investor loss in the event of default.

  • Rates debt securities in several bond market segments like:

    • Government, municipal and corporate bonds

    • Managed investments such as money market funds and fixed-income funds

    • Financial institutions including banks and non-bank finance companies

    • Asset classes in structured finance.

Detaied on Mood’s Ratings

Table Contain Shows Scheme the Detailed on Moods Ratings

Table Contain Shows Scheme the Detailed on Moods Ratings

Moody’s credit ratings

Investment grade

Rating

Long-term ratings

Short-term ratings

Aaa

Rated as the highest quality and lowest credit risk.

Prime-1Best ability to repay short-term debt

Aa1

Rated as high quality and very low credit risk.

Aa2

Aa3

A1

Rated as upper-medium grade and low credit risk.

A2

Prime-1/Prime-2Best ability or high ability to repay short term debt

A3

Baa1

Rated as medium grade, with some speculative elements and moderate credit risk.

Prime-2High ability to repay short term debt

Baa2

Prime-2/Prime-3High ability or acceptable ability to repay short term debt

Baa3

Prime-3Acceptable ability to repay short term debt

Speculative grade

Rating

Long-term ratings

Short-term ratings

Ba1

Judged to have speculative elements and a significant credit risk.

Not PrimeDo not fall within any of the prime categories

Ba2

Ba3

B1

Judged as being speculative and a high credit risk.

B2

B3

Caa1

Rated as poor quality and very high credit risk.

Caa2

Caa3

Ca

Judged to be highly speculative and with likelihood of being near or in default, but some possibility of recovering principal and interest.

C

Rated as the lowest quality, usually in default and low likelihood of recovering principal or interest.

- Published/Last Modified on: November 29, 2017

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