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Moody's: Political crisis won't affect India's rating

However, the credit rating agency says the standoff between Govt and Left could affect FDI inflows into India.

business Updated: Aug 22, 2007 16:37 IST

Ruling out any change in India's sovereign rating due to a political standoff over the Indo-US nuclear deal, credit rating agency Moody's on Wednesday said the crisis was not serious enough to dent the country's economic policy framework.

"In the worst case, if this government falls, it would not be the first time such a thing would have happened for a given level of the sovereign rating and outlook," Moody's Sovereign Risk Vice President Aninda S Mitra told PTI from New York.

India has been given 'Baa3' foreign currency rating (investment grade) and 'Ba2' domestic currency rating (speculative grade). The domestic currency rating is two notches below the foreign currency rating and reflects high public debt levels.

Moody's, which maintains stable outlook for both the ratings, however, said the standoff between the government and the Left allies over the nuclear deal could affect FDI inflows into the country.

"Some FDI inflows with a high technology transfer component could be slowed, but given the unfolding events it is too early to conclude that investment confidence (to include portfolio flows) could be interminably affected in a negative fashion," Mitra added.

Moody's said that the situation was "pretty serious" and could impact India's foreign policies in the near-term.

"It is pretty serious from a domestic political standpoint in so far as it affects coalition politics and - to a lesser extent - the near-term orientation of India's foreign policies, but from a sovereign credit perspective it does not appear to be on the verge of having any egregious effects on the economic policy framework," Mitra said.