India's Fiscal Outlook and Credit Strength

NEW DELHI - According to Moody's Ratings, India's fiscal conditions are expected to continue to constrain its credit strength into 2025. Despite the potential economic benefits from US-China tensions, India faces significant fiscal challenges.

Economic Growth and Inflation Trends

Moody's report highlights that growth and inflation in the Asia Pacific region are stabilizing, supported by strong domestic demand and modest easing in financial conditions. However, proposed US trade restrictions could weaken economic output across the region.

Debt and Fiscal Consolidation Concerns

"India's fiscal conditions will continue to constrain its credit strength in 2025. We expect only gradual fiscal consolidation, and debt to remain significantly higher than the Baa-rated peer median of around 57 per cent," Moody's stated. The report also mentions that despite recent revenue gains, debt affordability remains weaker compared to rated peers.

Geopolitical Risks and Opportunities

Geopolitical tensions, particularly between the US and China, could divert trade and investment flows away from China, potentially benefiting India and Southeast Asian economies. However, domestic political risks and the need for fiscal consolidation post-elections pose additional challenges.