Moody's Investors Service has retained its sovereign rating on India at Baa3 with a stable outlook, it said in a press release.
According to the rating agency, the impact of the Russia-Ukraine conflict, inflation that hit a multi-year high recently, and global financial conditions are unlikely to affect the country's recovery from the COVID-19 pandemic.
"With higher capital buffers and greater liquidity, banks and nonbank financial institutions (NBFIs) pose much less risk to the sovereign than we previously anticipated, facilitating the ongoing recovery from the pandemic," it said.
The agency says India's economic environment could lead to a gradual reduction in the general fiscal deficit over the next few years but higher debt burden and weak debt affordability are some of the risks.
"Principal credit challenges include low per capita income, high general government debt, low debt affordability and limited government effectiveness," the agency said.
The agency has projected India's real gross domestic product (GDP) growth at 7.6 percent for FY23 and 6.3 percent for FY24.
Earlier, Moody's slashed India's economic growth projection for 2022 to 7.7 percent from its May projection of 8.8 percent, saying that rising interest rates, uneven monsoon, and slowing global growth will dampen economic momentum on a sequential basis.
According to Moody’s, services and manufacturing sectors have seen robust upswings in the economic activity.
The agency has cut the GDP growth forecast for G-20 countries to 2.5 percent from 3.1 percent in May. GDP growth forecast for the year 2023 has also been reduced to 2.1 percent from 2.9 percent.
According to the agency, the advanced economies of the G-20 will grow by 2.1 percent in 2022 and 1.1 percent in the next year. For the G-20 developing market countries, Moody's forecasts growth of 3.3 percent in 2022 and 3.8 percent for the next year.
