Chennai: Maintaining its outlook on India`s `Baa3` rating as stable, global credit rating agency Moody`s Investors Service said on Wednesday that an economic recovery along with fiscal improvement will be credit-positive.
In its `Credit Opinion on India` report, Moody`s said: "The outlook on India`s Baa3 rating is stable, reflecting the balance between credit support offered by India`s favourable growth prospects and the credit risks from India`s inflation, infrastructure and fiscal metrics, which are weaker than similarly rated peers."
According to Moody`s, an economic growth recovery accompanied by improvement in fiscal, inflation and balance of payments metrics would be credit-positive.
A reduction in infrastructure bottlenecks and regulatory red tape would raise potential growth and competitiveness -- this would also be credit-positive.
Moody`s said a rating downgrade would be triggered by a further worsening of India`s fiscal position or rising contingent liabilities from the state-owned banking sector or an increase in balance of payments risks.
On India`s credit strength, Moody`s listed out its large diversified economy, healthy private savings rate and agile private corporate sector.
According to Moody`s, the credit challenges include high government debt and deficits; weak physical and social infrastructure; recurrent inflation and regulatory uncertainty and complexity.