Moody's Investors Service on June 1 downgraded India's rating to BAA3 and maintained the negative outlook.
"Moody's has adowngraded India's local-currency senior unsecured rating to Baa3 from Baa2, and its short-term local-currency rating to P-3 from P-2. The outlook remains negative.The decision to downgrade India's ratings reflects Moody's view that the country's policymaking institutions will be challenged in enacting and implementing policies which effectively mitigate the risks of a sustained period," it said in a statement.
Moody's rating is in line with other agencies such as S&P and Fitch.
"While today's action is taken in the context of the coronavirus pandemic, it was not driven by the impact of the pandemic. Rather, the pandemic amplifies vulnerabilities in India's credit profile that were present and building prior to the shock, and which motivated the assignment of a negative outlook last year," it said.
Moody's expects prolonged period of slow growth to continue well beyond the pandemic.
India's progress has been hamstrung by tardy implementation of reforms, it noted.
"Moody's upgrade of India's ratings to Baa2 in November 2017 was based on the expectation that effective implementation of key reforms would strengthen the sovereign's credit profile through a gradual but persistent improvement in economic, institutional and fiscal strength. Since then, implementation of these reforms has been relatively weak and has not resulted in material credit improvements, indicating limited policy effectiveness," it said.
The short-term foreign-currency bond ceiling remains unchanged at Prime-2, and the short-term foreign-currency bank deposit ceiling was lowered to Prime-3 from Prime -2. The long-term local currency bond and bank deposit ceilings were lowered to A2 from A1.Follow our full coverage of the coronavirus outbreak here