Global rating agency Moody's has revised its forecast, on the Indian economic growth, lower to 4.5 per cent for 2013-14 from 5.5 per cent projected earlier, on account of deteriorating macro-economic indicators of the country. Citing depreciating rupee a major hurdle for economic growth, Moody’s said that recent depreciation in the rupee value will increase inflationary pressures in the country and keep domestic interest rates relatively high, which will hinder a recovery in domestic demand growth. Indian economic growth slowed down to four-year low at 4.4 percent in Q1 FY14.
Moody's also warned that India is among the countries that are most vulnerable to capital outflows as it relies heavily on external funding. By adding further, it said that earlier, US Fed's talk for tapering of monetary stimulus depreciated the rupee by 15 per cent, making it the worst performing currency in Asia. The domestic currency depreciated to a record low of 68.86 to the US dollar on August 28 on account of high foreign institutional investors (FIIs) outflow and high current account deficit (CAD).
Presently, Moody’s had reaffirmed ‘Baa3’ (which is equivalent to BBB minus) sovereign credit rating for India that indicates investment grade but with a stable outlook. It had already raised concerns over the rising inflation, inadequate infrastructure and higher subsidy burden on the government.
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