Moody’s have downgraded India’s foreign and local-currency long-term issuer ratings to Baa3. The latest downgrade reduces India to the lowest investment grade rating as the pandemic continues to highlight weaknesses in India’s Credit profile. If you’re the Indian Central bank(RBI) the fear from here is that the other rating agencies including Fitch and S&P also downgrade Indian debt. This may complicate attempts from the RBI to raise debt in the near future and cause local interest rates and and inflation to rise. This is because other banks will charge RBI a higher interest rate to lend them money given their credit unworthiness. A depreciating Rupee which will make imports a lot more expensive hence, increasing inflation.

Should India be worried about its economic growth? Discuss…

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