Moody’s downgrades India’s rating to Baa3

New Delhi, June 02: Moody's Investor Service on Monday downgraded India's sovereign rating to Baa3. This is the lowest investment grade.

"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 of relatively low growth, significant further deterioration in the general government fiscal position and stress in the financial sector, a statement from Moody's read.

Moody's also lowered India's long term foreign currency bond and bank deposit ceilings to Baa2 and Baa3 from Baa1 and Baa2 respectively. "India faces a prolonged period of slower growth relative to the country's potential, rising debt, further weakening of debt affordability and persistent stress in parts of the financial system, all of which the country's policymaking institutions will be challenged to mitigate and contain," the statement also read.