Moody's flat on India outlook, cautious on deficit

Moody's has maintained a stable outlook on India's sovereign rating but struck a note of caution on the precarious situation of public finances, underlining that high fiscal deficit can pull down growth. HT reports.

Global credit ratings agency Moody's has maintained a stable outlook on India's sovereign rating but struck a note of caution on the precarious situation of public finances, underlining that high fiscal deficit can pull down growth.

"Large government deficits and debt ratios as well as supply constraints in the form of infrastructure, policy and administrative inefficiencies constrain the sovereign credit profile," Moody's said in its India rating report.

The agency maintained India's rating at Baa3 - the lowest level in the investment grade or a notch above "junk" - that carries a higher risk of default by the government.

"Government finances are the weakest aspect of India's macroeconomic profile... We expect the government's fiscal position to remain weaker than peers over the medium term," it said, adding sustained improvement in public finances could result in rating upgrade.

Finance minister P Chidambaram and top financial administrators are preparing the details of the budget for 2013-14 amid a gloomy economic situation and a shaky balance sheet.

Moody's expects Indian economy to grow by 5.4% in the current fiscal and 6 % in 2013-14.