Moody's said the change partly reflected lower government and policy effectiveness in addressing 'economic and institutional weaknesses.'
"While government measures to support the economy should help to reduce the depth and duration of India's growth slowdown, prolonged financial stress among rural households, weak job creation, and, more recently, a credit crunch among non-bank financial institutions , have increased the probability of a more entrenched slowdown," Moody's analysts said in a report.
The report added prospects of further reforms — that could support investment and growth at high levels and broaden India's narrow tax base — have diminished. Government data showed India's net tax collection in the six months ended Sept. 30 is lowest in the past five years, far below the government's budget target, local outletearlier this month. Lower tax revenues could put a strain on the Indian government's fiscal deficit target of 3.3% of GDP as it aims to spend on some fiscal measures to stimulate the economy.
Moody's affirmed India's other ratings and predicted the economic growth slowdown to be in part "long-lasting."
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