Moody’s Investor Services has retained India’s sovereign rating at ‘Baa3’ with a stable outlook. According to it, the Russia-Ukraine war, higher inflation and tightening global financial conditions may not pose a challenge in the path of the ongoing recovery from the pandemic in 2022 and 2023.

According to the ratings agency, while the risk from a higher debt burden and weak debt affordability persist, it expects that the economic environment will allow for a gradual narrowing in the general government fiscal deficit over the next few years.

Its large and diversified economy with high growth potential, a relatively strong external position, and a stable domestic financing base for government debt, have supported its credit profile, the Agency said.

However, Moody’s has added that slower growth than projected would contribute to a continued rise in the debt burden, which could weaken the sovereign’s fiscal strength and lead to a negative rating action.

Moody’s had earlier slashed the country’s GDP forecast from 8.3 percent in 2021 to 7.7 percent in 2022, to further 5.3 percent in 2023.

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