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Moody’s upgrades India’s credit rating to stable

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Global ratings agency Moody's Investors Service has upgraded its outlook on India to stable from negative, saying downside risks in the country’s economy and its financial institutions have reduced

Global ratings agency Moody's Investors Service has upgraded its outlook on India to stable from negative, saying downside risks in the country’s economy and its financial institutions have reduced.

Moody's affirmed India's sovereign credit rating at Baa3.

"The decision to change the outlook to stable reflects Moody's view that the downside risks from negative feedback between the real economy and financial system are receding," the agency said in a note.

Moody's said India's decision to keep sufficient liquidity in financial institutions has also reduced the risk that the economy could face from the banking sector.

The Indian economy has shown signs of staging a combeback after a devastating second wave of COVID-19 hit the country leaving a trail of death and destruction of livelihoods in its wake during April and May this year.

After the second Covid wave the global ratings agencies and economists  had downgraded their growth outlook for India.

The Moody's report comes as a shot in the arm for the government which has said the Indian economy is back on the road to recovery.

The government has cited higher tax collections, strong power consumption and record growth in exports as signs of economic revival.

India's economy grew 20.1% during the April-June period although the high figure is in comparison to the 24.4% contraction during the same period last year, it reflects the revival that is taking place. 

The government had decided to let the fiscal deficit go up as it had to spend its way out of the crisis in order to spend on social welfare schemes to feed the poor and increased expenditure on health due to Covid.

It also had to take steps to ensure that industries did not collapse and jobs were not lost.