India isn’t the one nation that has been downgraded, 21 different rising market and growing economies have additionally faced some ratings motion, a report by the State Bank of India stated.
On Monday, ratings company Moody’s downgraded the nation’s sovereign ranking from Baa2 to Baa3, which is one notch above junk grade, citing deteriorating fiscal place and stress within the monetary system, aside from lack of financial reforms.
“However, India has not been alone to witness rating downgrade. So far, around 21 emerging and developing countries have registered either a rating and/ or outlook downgrade by the agency,” the SBI report stated.
The report by Group Chief Economic Adviser of SBI Soumya Kanti Ghosh stated the ratings motion didn’t come as a complete shock as rising markets had been at all times extra inclined to ranking downgrades in comparison with developed economies in instances of stress even when a few of them had very low debt to GDP ratio.
“Pertinently, among all the different criteria used by credit rating agencies, perhaps growth considerations always take centre stage, and if historical trends are to be believed, even takes primacy over fiscal sustainability. There are instances where fiscal situation has deteriorated but the rating has been indeed upgraded,” the report stated, including that the ranking motion was not a mirrored image on the power of the federal government to service its debt obligations.
The report additionally stated the downgrade was unlikely to end in any rapid repercussions on trade charges and bond spreads on offshore bonds.
The home fairness indices led to inexperienced on Tuesday whereas the rupee additionally strengthened in opposition to the greenback.
“It seems that the downgrade was not completely unexpected. This is clearly visible in the data that market is not yet impacted by the rating downgrade. BSE Sensex and NSE Nifty rose and even rupee appreciated against the U.S. dollar,” the report stated.