Moody`s keeps India rating at Baa3 with stable outlook
Moody’s Ratings on Monday maintained India’s sovereign credit rating at Baa3 with a stable outlook.
In its latest report, the agency said India’s stable outlook reflects improving fiscal indicators since the pandemic and relatively resilient economic growth compared to other countries.
It also noted that continued investments in infrastructure, digitalisation, and financial sector reforms have supported a steady recovery.
However, Moody’s warned that rising geopolitical tensions could slow down growth and push inflation higher.
It expects India’s GDP growth to moderate to around 6 per cent in FY27, compared to an estimated 7.3 per cent in FY26, as external pressures weigh on the economy.
The agency also flagged concerns on inflation, projecting it to rise to 4.8 per cent in FY27 from around 2.4 per cent this year.
It said disruptions in supplies, especially LPG and fertilizers, could lead to higher fuel and transport costs, which may eventually impact food prices as well.
Moody’s further pointed out that India’s external position could come under pressure. The Middle East, which accounts for nearly 40 per cent of India’s inward remittances, remains a key region.
Any disruption to jobs or economic activity there could affect remittance flows and domestic demand in India.
Additionally, higher import costs for energy and fertilisers, along with possible disruptions in exports to the region, could widen the current account deficit.
On the fiscal front, the agency said India’s debt levels remain high, with government debt expected to stay above 80 per cent of GDP in the medium term.
Fiscal consolidation is likely to be gradual, with the central government targeting a deficit of 4.3 per cent of GDP in FY27, only slightly lower than 4.4 per cent in FY26.
Moody’s said that while India’s economic outlook remains stable, any sustained improvement in debt levels and fiscal strength could support a future rating upgrade.
At the same time, weaker growth or higher fiscal slippage may put pressure on the rating.
Looking ahead, the agency expects India’s growth to see a modest recovery to around 6.2 per cent in FY28, indicating steady but cautious progress amid global uncertainties.
