Ratings agency to discuss India outlook

Global credit ratings agency Moody's, which cut the outlook for Indian banking system this week, will meet finance ministry officials on Monday as part of a review of the country's rating, a report said. Moody's currently assigns a rating of Baa3 -- the lowest investment-grade rating -- to Asia's third-largest economy. "We are meeting Moody's on Monday to discuss India's sovereign credit rating," a senior finance ministry official told the Press Trust of India on Friday. The meeting comes as India's economy passes through a rough patch, with the government expecting growth for this fiscal year to March 2012 to slow to 7.6 percent from 8.5 percent last year. Investment houses are more pessimistic, with Goldman Sachs forecasting growth of just seven percent. The Moody's officials were expected to talk about steps Premier Manmohan Singh's government has taken to reduce the fiscal deficit, reform the taxation system and recapitalise the banking sector, the Press Trust of India said. Ratings are significant as they help a country borrow funds at competitive rates. Economists say India's public finances are deteriorating with a rising subsidy bill, lower-than-expected tax revenues and privatisation earnings, and mounting public debt. Adding to the gloom is perceived paralysis in the Congress government, which has postponed major economic reforms as it fights numerous corruption scandals. On Wednesday, Moody's downgraded the outlook for India's banking system to "negative" from "stable", warning that slowing economic growth could hit the quality of bank loans and other assets as well as profits. But on Thursday, rival ratings agency Standard & Poor's revised India's banking industry risk assessment upwards, saying the sector had a "high level of stable, core customer deposits". India's government has dismissed Moody's downgrade, saying the negative rating had "no significance". "Looking at how the global banks are faring, we are much stronger," India's Financial Services Secretary D.K. Mittal said.