New Delhi, October 5: Global ratings agency Moody's Investors Service on Tuesday changed India's ratings outlook to stable from negative. Accordingly, Moody's affirmed the country's foreign-currency and local currency long-term issuer ratings and the local-currency senior unsecured rating at Baa3. Moody's also affirmed India's other short-term local currency rating at P-3.

"The decision to change the outlook to stable reflects Moody's view that the downside risks from negative feedback between the real economy and financial system are receding," the agency said in its ratings report. "With higher capital cushions and greater liquidity, banks and non-bank financial institutions pose much lesser risk to the sovereign than Moody's previously anticipated." India Ratings Revises FY22 GDP Growth Estimate to 9.4% From 9.6%, Says Economic Recovery Depends on Progress of COVID-19 Vaccination Drive.

Besides, it pointed out that risks stemming from a high debt burden and weak debt affordability remain. Furthermore, Moody's expects that the economic environment will allow for a gradual reduction of the general government fiscal deficit over the next few years, preventing further deterioration of the sovereign credit profile.

"The affirmation of the Baa3 ratings balances India's key credit strengths, which include a large and diversified economy with high growth potential, a relatively strong external position, and a stable domestic financing base for government debt, against its principal credit challenges, including low per capita incomes, high general government debt, low debt affordability and more limited government effectiveness."

(The above story first appeared on LatestLY on Oct 05, 2021 07:59 PM IST. For more news and updates on politics, world, sports, entertainment and lifestyle, log on to our website latestly.com).