Rupee falls could constrain India's ratings: Moody's

Last Updated: Thu, Jul 18, 2013 08:53 hrs
Kashmiri money changer Nissar Ahmad displays newer Indian rupee notes in Srinagar

Moody's Investors Service says rupee depreciation will exacerbate inflationary and fiscal pressures, with both factors potentially constraining the country's sovereign rating.

India's recent measures to prop up the rupee may limit exchange rate volatility to some degree but a sustained reversal in the rupee's would require a significant narrowing of the trade deficit or large capital flows, Moody's adds.

"Given the subdued global growth outlook and price inelasticity of some major imports, depreciation is unlikely to accelerate export growth or curb import growth significantly in the near term," analysts wrote.

Moody's has a "stable" outlook on India's "Baa3" rating, its lowest investment grade-rating.

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