Fundamentals of economy quite robust: Finance Ministry responds to Moody`s change in outlook

NEW DELHI: The Finance Ministry on Friday said that the fundamentals of the economy “remain quite robust” with inflation under check after Moody's Investors Service changed its outlook on India's ratings to "negative" from "stable", citing increasing risks that the country's economic growth will remain lower than in the past.

The Finance Ministry issued a statement in which it said, ''India continues to be among the fastest-growing major economies in the world and its relative standing remains unaffected. ''

“IMF in their latest World Economic Outlook has stated that Indian Economy is set to grow at 6.1% in 2019, picking up to 7 % in 2020. As India’s potential growth rate remains unchanged, assessment by IMF and other multilateral organisations continue to underline a positive outlook on India,” the FM's statement added.

The reaction from the government came after Moody`s Investors Service downgraded its outlook on India`s ratings to "negative" from "stable", attributing increasing risks that the country`s economic growth will remain lower than in the past.

The outlook partly reflects government and policy ineffectiveness in addressing economic weakness, which led to an increase in debt burden from already high levels, the rating agency said on Thursday.

At a six-year low, India's economy grew only 5 per cent year-on-year between April and June, its weakest pace since 2013, as consumer demand and government spending slowed amid global trade frictions.

The international rating agency said that it estimates that the country`s growth slowdown is in part long-lasting while backing its other ratings for India.

Responding to it, the FM said that it is aware that Moody`s Investors Service has changed the outlook India`s ratings to negative from stable while keeping the foreign-currency and local-currency long-term issuer ratings unchanged at Baa2.

As India`s potential growth rate remains unchanged, assessment by IMF and other multilateral organizations continue to underline a positive outlook on India, the Finance Ministry said.

The Government has undertaken a series of the financial sector and other reforms to strengthen the economy as a whole. Government of India has also proactively taken policy decisions 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 said

India continues to offer strong prospects of growth in the near and medium-term, the Finance Ministry added.

(With Agency inputs)