India’s debt load will increase going forward, predicts Moody’s

by Mapping Returns

According to Moody‘s Investors Service, debt levels in nations like Malaysia and India will either climb further or stabilise at higher levels.

According to the most recent assessment from Moody’s Investors Service, high commodity prices will prevent expenditure on food and fuel subsidies or other measures from declining. This is especially true for countries like Bangladesh and India that have elections coming up in 2023 or early 2024.

Elections in nations like Bangladesh, India, Indonesia, and the Maldives will take place in 2023 or 2024, which will limit their ability to implement additional structural reforms without the threat of social opposition, according to the ratings agency.

In contrast to the unfavourable view for sovereigns internationally, it claims that the credit worthiness outlook for countries in Asia-Pacific (APAC), including India, is stable until 2023.

“With controlled government liquidity concerns, usually stable debt dynamics, and generally solid external positions, debt sustainability and financial stability are pretty well anchored throughout the region. Even though global inflation is higher and financial conditions are tighter, GDP growth will stabilise close to potential levels and outperform other regions. The majority of sovereigns have started fiscal consolidation, but the pace is being slowed by social pressures “According to Moody’s, who also notes that as interest rates rise, debt affordability will decline from generally healthy levels and remain manageable for the majority of people in the area.

According to Moody’s, higher interest rates will result from increased central bank policy rates both locally and internationally, as well as from a general lack of risk taking on international capital markets.

According to the report, “negative credit effects will also be less pronounced for frontier and emerging markets with a significant degree of concessional financing, including Bangladesh (Ba3 review for downgrade) and Fiji, and those with deep domestic funding, including India, Malaysia, and Thailand, where large institutional investor bases and banking systems have helped to anchor debt affordability.”

India’s government debt increased from 71% of GDP in FY19 to 90% in FY21, and, according to domestic brokerage Motilal Oswal, it will probably decline to 82.3% of GDP in FY23. The primary deficit and the weighted excess of growth over (effective) interest rates together make up the increase in government debt. “Nominal GDP growth is anticipated to be 7.3% YoY in FY24 (as opposed to 15% in FY23 and 20% in FY22), which is comparable to the effective interest rate and will increase the government debt-to-GDP ratio to the amount of the primary deficit. According to our calculations, the government debt of India might increase to 84.7% of GDP in FY24 and then to 85% in FY25 “last week, the brokerage stated.

According to Moody’s Analytics, India saw a two-step pandemic recovery in 2020 and again in 2021–2022, which points to slower growth in 2019 that is more in line with the country’s long-term potential. China is not the only weak link in the global economy, according to the ratings and research company. “India, the other Asian superpower, saw its value exports in October fall year over year as well. After its quick comeback from extensive shutdowns last year and again earlier this year, this is somewhat disheartening “It read.

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