Moody's will be pressured by the government to upgrade the country's rating

A meeting between the finance ministry and the rating agency will be held on September 4

New Delhi: The Indian government may suggest rating agency Moody's to upgrade the country's rating based on the economic recovery scenario. Sources familiar with the developments said that the finance ministry will hold a meeting with Moody's Investors Service on September 7, in the meantime, which may force India to upgrade its rating.

During the meeting, the finance ministry will also explain to the rating agency how India will achieve its budget targets for the current financial year. Moody's downgraded India's sovereign rating to 'Baa2' in June last year with a negative outlook.

The global ratings agency, citing slow growth in the long run amid the Covid-12 epidemic, said the outbreak had further weakened India's credit profile, which was already in recession. At that time, it had downgraded six other countries as well as given the lowest investment grade.

Last month, Moody's said economic activity in India was picking up after a phased relaxation of the Covid-15 ban. Growth could accelerate as economies around the world slowly open up. He added that he did not see any change in India's sovereign rating for the next two years.

The rating agency believes that the second wave of epidemics has disrupted growth and increased the risk in the long run. In its August 2013 report on Global Macro Outlook 2021, it has kept India's growth rate unchanged at 7.5 per cent for the 2021 calendar year and 8 per cent for the year 203. It may be mentioned that in the financial year 2020-21, the Indian economy contracted by 3%.

India's GDP was expected to grow in double digits in the current financial year, but growth estimates are being slashed due to the second wave of the Koro epidemic. Recently, the Asian Development Bank (ADB) cut its growth forecast for India for the current year from 11 per cent to 10 per cent, citing the adverse effects of the second wave of epidemics.

Notably, other rating agencies, including Moody's, have been criticized for being biased towards developing economies like India. Allegedly emerging economies were knowingly given low rating credit despite encouraging growth.

Standard & Poor's (S&P) has given India the lowest investment grade 'BBB' rating with a stable outlook. So Fitch has maintained India's 'BBB-' sovereign rating with a negative outlook.