Moody’s Maintains India’s Rating at Baa3 with Stable Outlook, Signals Strong Economic Confidence

New Delhi (The Uttam Hindu): In a positive development for the Indian economy, Moody’s Investors Service has reaffirmed its confidence in India’s creditworthiness. On Monday, the agency-maintained India’s long-term local and foreign currency issuer rating at Baa3 with a stable outlook.

In simple terms, Moody’s believes that India has a strong capacity to meet its domestic and external debt obligations. The agency also maintained India’s senior unsecured rating at Baa3, indicating the country’s ability to repay debt without requiring additional guarantees.

According to Moody’s, India’s rapidly growing economy, strong external position, and robust domestic financial base justify the rating. These factors enable the government to manage its fiscal deficit effectively. The agency also noted that these strengths help shield India from external challenges, such as high tariffs or global policy shifts, which could impact investment in the manufacturing sector.

However, the report cautioned that India’s high debt burden remains a long-term financial challenge. Despite good GDP growth and gradual fiscal consolidation, reducing this debt will take time. Recent fiscal measures aimed at boosting private consumption have slightly weakened the government’s revenue base.

Earlier, on August 14, S&P Global Ratings had upgraded India’s sovereign rating from BBB- to BBB, reinforcing international confidence in the country’s economic stability.

Adding to the positive outlook, global advisory firm EY increased its forecast for India’s real GDP growth in FY 2025-26 from 6.5% to 6.7%, citing strong demand improvements, a robust 7.8% GDP growth in the June quarter, and GST reforms. Although global challenges may affect exports, EY expects India to maintain a 6.7% growth rate in FY 2026.