Govt borrowing too high to raise India’s rating: Moody’s

Global credit rating agency Moody's Investors Service said on Wednesday that the Indian government's massive public borrowing was the main reason why it could not upgrade the country to an investment-grade rating.

India's public debt, at 70 per cent of its gross domestic product, is preventing Asia's third-biggest economy from securing the upgrade, Bloomberg quoted Moody's.

The nation's fiscal deficit and ''the debt burden, which is high relative to similarly rated countries,'' are among the constraints, Atsi Sheth, a sovereign analyst at Moody's, said. ''For the ratings to be improved, we will have to be comfortable that India's government debt is at a level that can be sustained over the medium term.''

The finance ministry pitched for a higher rating in a meeting with Moody's officials on 14 November, R Gopalan, secretary, department of economic affairs, said later.

But at the same time, the government has raised its planned borrowing for the remaining six months of the fiscal year by 32 per cent as revenue collections continue to fall short of targets. Finance minister Pranab Mukherjee said on 4 October that it may be hard to meet his goal of cutting the budget deficit to a four-year low of 4.6 per cent of GDP.

Moody's rates India's rupee sovereign debt at Ba1, the highest junk grade, a level shared by Indonesia and Morocco. India's foreign-currency debt is rated at Baa3, the lowest investment grade.

Sheth, who declined to comment on the lobbying by the finance ministry, expects the budget gap to be as high as 5.5 per cent in the fiscal ending 31 March. Mukherjee said on Wednesday that the government isn't revising its deficit target yet.