Moody’s Investors Service cut India’s credit rating outlook to “negative,” citing a litany of problems from a worsening shadow-banking crunch and a prolonged slowdown in the economy to rising public debt.
The sharp slowdown in growth and a surprise corporate tax is expected to put the Indian government’s finances under pressure this year.
Moody’s is projecting a budget deficit of 3.7 percent of GDP in the year through March next year, a breach of the government’s 3.3 percent target.
Moody’s retained India’s foreign currency rating at “Baa2,” the second-lowest investment grade score, but said it could downgrade the nation if fiscal metrics deteriorated materially.
India’s growth outlook has weakened sharply this year, with a crunch that started out in the shadow-banking industry spreading to retail businesses, automakers, home sales and heavy industries.
Growth has come down to a six-year low of 5 percent, with Moody’s saying that there is a low chance of sustained growth at or above 8 percent.
The slowdown “has been deeper and longer than anticipated,” Moody’s Sovereign Risk Group vice president William Foster said in an interview with Bloomberg TV. “What we need to see for it to stabilize is really growth ticking back up on a more sustainable basis at higher levels, and that feeding into the government’s ability to raise taxes and bring down fiscal deficit.”
The government yesterday said that it took note of the Moody’s revision.
While it is flagging, India continues to be among the fastest-growing major economies in the world, it said.
“India’s relative standing remains unaffected,” the Indian Ministry of Finance said in a statement.
Steps taken by the government to strengthen the economy “would attract capital flows and stimulate investments,” it said.
The Reserve Bank of India has already cut interest rates five times this year, although lenders are not passing that easing on to customers.
Moody’s said it does not expect the credit crunch among non-bank financial institutions, which were the main source of consumer loans in recent years, to be resolved quickly.
Investors would closely watch the nation’s GDP data for signs of further, long-lasting weakness, which could result in another negative shift, Moody’s said.
Stabilization in the non-bank financial sector would be credit positive and could indicate less risk of negative spillover into banks, Moody’s added.
“There have been some concerns about fiscal slippage,” said Shamaila Khan, director of emerging-market debt at AllianceBernstein in New York. “If the government is able to maintain discipline and mitigate spending by doing more privatizations that could help allay these concerns.”
“There’s a reasonable probability that that could happen and this is a negative outlook, so it gives them some time to play this out,” Khan said.
Moody’s rates India one level higher than Fitch Ratings and S&P Global Ratings, with the two latter companies still holding India’s outlook at “stable.”
PLANNED OUT: The government is lifting sale and export restrictions on 60% of the 20 million masks made daily, but people can still make purchases using their NHI cards Twenty thousand boxes of 50 masks each would be on sale at FamilyMart convenience stores starting tomorrow, Taiwan FamilyMart Co Ltd (全家便利商店) said yesterday. A box of 50 masks would cost NT$249 for those with FamilyMart memberships and NT$299 for those without, with no limits placed on how many boxes a person can buy, the company said. Convenience store chain operator Hi-Life International Co Ltd (萊爾富) said that it would also start selling masks from tomorrow. It has yet to announce details about prices and quantity. Hypermarket chain operator Carrefour Taiwan (家樂福) said that it would start selling packs of five
BOOSTING BUYING: A source said that the idea of pre-ordering vouchers online is being considered, but the preliminary plan is for people to buy them at post offices A stimulus voucher program to be rolled out next month to boost consumption would be available not only to Taiwanese, but also foreign nationals and Chinese spouses who hold residency permits, a source familiar with the matter said yesterday. The government is fine-tuning the details of the program, which involves issuing vouchers for in-store purchases to revive buying amid the COVID-19 pandemic. During a radio interview on Monday last week, National Development Council (NDC) Minister Kung Ming-hsin (龔明鑫) said that the plan is to allow anyone, regardless of age or income level, to buy NT$3,000 (US$99.89) worth of vouchers for
Delta Electronics Inc (台達電), the nation’s leading power management solutions provider, has signed an agreement to acquire Canadian software firm Trihedral Engineering Ltd to bolster its smart production efforts, it said on Saturday. Delta said in a statement that it would acquire Trihedral for C$45 million (US$32.68 million) through its 100 percent-owned subsidiary Delta Electronics (Netherlands) BV. Trihedral specializes in supervisory control and data acquisition (SCADA) and industrial Internet of Things software, which would strengthen Delta’s hardware offerings in fast-growing areas such as automation, artificial intelligence and data analytics, it said. “The collection, monitoring and analyzing of data are critical to Delta’s two
‘ONE-STOP SHOP’: A Miaoli official said that the factory in the Jhunan section of the Hsinchu Science Park would create more than 1,000 jobs and boost prosperity A new high-end IC packaging and testing plant planned by contract chipmaker Taiwan Semiconductor Manufacturing Co (TSMC, 台積電) in Miaoli County is expected to start operations in the middle of next year, Miaoli County Commissioner Hsu Yao-chang (徐耀昌) said. Hsu wrote on Facebook that TSMC, the world’s largest pure wafer foundry operator, would invest NT$303.2 billion (US$10.1 billion) to build the plant, the largest-ever single investment in Taiwan. However, TSMC declined to disclose the financial terms of the deal, while a company board meeting on May 12 approved a spending plan worth NT$168.2 billion as part of its investment plans. Construction of the