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FinMin brings international evidence to counter Moody’s rating outlook cut

FE Online
Corporate tax cut, Moody's Investors Service, Moodys, rural financial stress, IT services companies, GDP, corporate income tax revenue

Even as Moody's Investor Service on Friday cut India's rating outlook to negative, the government responded citing the recently introduced International Monetary Fund's (IMF) World Economic Outlook which underlines a positive outlook for the economy. "India’s relative standing remains unaffected," it said citing the IMF report that said India is expected to grow at 6.1 per cent in 2019 and rising to 7 per cent in the year after. India continues to be the fastest-growing major economies in the world currently, the government also said in the statement. The fundamentals of the economy are strong and the recently announced bold reforms are expected to boost investments. The latest economic measures by the government would attract capital flows and stimulate investments, it said.

On Friday, the global rating agency slashed India's rating outlook to negative from stable earlier, saying rising risks will lower the economic growth going forward. It affirmed the Baa2 foreign-currency and local-currency long-term issuer ratings for India.

Also read: Share Market LIVE: FinMin responds to Moody’s rating outlook cut; Sensex down, Nifty below 12K

The rating agency said that lower effectiveness of the government agencies at solving long-standing economic weakness is resulting in gradual debt burden rise from the already higher levels. The extended financial stress among rural households, weak job creation, and, more recently, a credit crunch among non-bank financial institutions (NBFIs), have increased the possibility of an extended economic slowdown, Moody's added.

Meanwhile, the Indian economy is undergoing a slowdown for some time now on account of both global and domestic factors. However, Finance Minister Nirmala Sitharaman had introduced a slew of measures in the past few months to overcome the sluggishness in the economy. The economic reforms range from doing away with the enhanced tax on the super-rich and introducing a new fund for the real estate sector.