Centre says economy on solid ground
The finance ministry on Friday came out in strong defence of the economy in response to Moody’s cutting India’s credit rating outlook to negative, saying the fundamentals remained robust and growth potential was unchanged.
“India continues to be among the fastest growing major economies of the world, India’s relative standing remains unaffected,” the finance ministry said in its reaction to the outlook cut, adding the economy’s fundamentals remained “quite robust”.
“As India’s potential growth rate remains unchanged, assessment by IMF and other multilateral organisations continue to underline a positive outlook on India,” the ministry said.
The International Monetary Fund’s (IMF) recent World Economic Outlook put India’s economic growth at 6.1 per cent in 2019 and rising to 7 per cent the next year.
The ministry pointed out that the government has undertaken a series of financial sector and other reforms to strengthen the economy as a whole in response to the global slowdown. “These measures would lead to a positive outlook on India and would attract capital flows and stimulate investments,” it added.
Professor N. R. Bhanumurthy of the National Institute of Public Finance and Policy said “the rating is only a reflection of the short-term outlook of slowdown in the economy and the country’s medium to long-term growth story is strong with the recent measures taken by the government and more steps expected in the coming days”.
“The decision taken by Moody’s to change the rating outlook does come as a surprise as the economy has been progressing fairly well in terms of economic reforms induced by the government over the last couple of months,” said Madan Sabnavis, chief economist at Care Rating.
“Moody’s decision to cut its outlook on India’s sovereign rating is based in part on the government’s struggle to rein in the fiscal deficit. This is justifiable if a little behind the curve,” Shilen Shah, Senior India Economist of Capital Economics said.