India's debt burden likely to decline, key determinant of fiscal strength will be affordability: Moody's

New Delhi: Moody's Investors Service on Thursday said that the key determinant of India's fiscal strength and credit profile will be debt affordability and projected a downward trend for the debt burden. "As long as nominal GDP growth holds, India's debt burden will be stable or decline slightly," Moody's said.

India's growing GDP is a key driver of projections of downward trend in debt burden

In a report, it said that India's fast-growing GDP, which is estimated to average 11 percent in nominal terms, is a key driver of the projections of a downward trend in the country's debt burden. "As in the past, the key determinant of fiscal strength and the credit profile will be debt affordability and in particular the proportion of revenue absorbed by interest payments," Moody's said.

India has relatively high level of general govt debt

India has a relatively high level of general government debt, estimated at around 81.8 percent of GDP for 2022-23, compared with the Baa-rated median of around 56 percent. The country also has low debt affordability, in terms of general government interest payments as a percentage of revenues, which for India is estimated at 26 percent for 2022-23, compared with the Baa median of around 8.4 percent.

Moody's has given a 'Baa3' sovereign credit rating to India, with stable outlook

"At 26 percent currently, it is a large proportion, which, if not further addressed via a continued broadening of the revenue base, will remain an important constraint on the government's ability to provide more support for growth and address developmental needs," Moody's added. Moody's has given a 'Baa3' sovereign credit rating to India, with stable outlook. Baa3 is the lowest investment grade rating. On Friday, Moody's is scheduled to meet Indian government officials during which the latter is likely to make a strong pitch for a sovereign rating upgrade.

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