Moody’s Retains India’s Baa3 Rating, Stable Outlook — Growth to Outpace G20 at 6.5% GDP in FY25
1. Moody’s Rating Decision
1.1 India’s sovereign credit rating retained at Baa3 (Stable Outlook).
1.2 Key reasons:
- Large and fast-growing economy.
- Sound external position.
- Stable domestic financing base.
1.3 Resilience maintained despite global uncertainties and high US tariffs.
2. India’s Growth Outlook vs G20
2.1 FY24 GDP Growth: 9.2%.
2.2 FY25 GDP Growth: 6.5% (Moderation).
2.3 FY26 Projection: 6.5% sustained.
2.4 India to remain fastest-growing G20 economy for next 2–3 years.
Table 1: India vs G20 Growth Rates
| Country/Group | 2024 Growth (%) | 2025 Growth (%) | 2026 Projection (%) |
|---|---|---|---|
| India | 9.2 | 6.5 | 6.5 |
| G20 Avg. | 2.9 | 2.7 | 2.8 |
3. Fiscal and Debt Challenges
3.1 Weakness: High Government Debt.
3.2 Gradual fiscal consolidation will lower debt very slowly.
3.3 Weak debt affordability due to:
- Eroded revenue base (consumption-focused fiscal measures).
- High interest burden.
4. Global Ratings Landscape
4.1 Other upgrades in FY25:
- R&I (Japan): Upgraded India to BBB+ (Stable).
- S&P Global Morningstar DBRS: Multiple upgrades (May & Aug).
4.2 India has secured 3 sovereign ratings upgrades in FY25.
5. External Trade & Tariff Impact
5.1 US Tariff Hike:
- India: 50%.
- Other Asia-Pacific peers: 15–20%.
5.2 Short-term impact: Minimal on GDP.
5.3 Medium-to-long term: - Limits higher value-added export manufacturing.
- Slows export diversification.
6. Domestic Growth Drivers
6.1 Large domestic market + favourable demographics.
6.2 Strong drivers:
- Government capital expenditure.
- Lower inflation trends.
- Easing monetary policy.
- Resilient private consumption.
6.3 External resilience: - Services exports stable.
- Worker remittances unaffected.
- Current Account Deficit risks remain limited.
7. Risks & Constraints
7.1 Revenue-eroding fiscal measures may slow debt reduction.
7.2 US policy shifts on outsourcing/visas → limited effect, but risk persists.
7.3 Geopolitical volatility could test resilience.
8. Financial Takeaways
- India continues to attract global rating confidence despite fiscal stress.
- Remains fastest-growing G20 economy (6.5% GDP in FY25 & FY26).
- Fiscal weakness and high tariffs (50%) are medium-term risks.
Disclaimer – The Profit India
This article is for informational purposes only. It does not constitute financial advice or investment recommendation. Readers are advised to consult certified financial experts before making any financial decisions.
