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In its latest credit assessment report on the Indian economy released on Monday, Moody’s Investors Service announced a downward revision to the country’s sovereign credit rating to a notch just above junk.

This comes as the global rating agency projects a prolonged period of slowdown in India’s economic growth and ballooning debt, in the face of the coronavirus crisis.

Key quotes

“The cut to Baa3 from Baa2 was not driven directly by the impact of the coronavirus but that the pandemic had amplified vulnerabilities in India’s credit profile that were present and building prior to the shock.

Maintained a negative outlook for the new sovereign rating.

Worsening government finances as the coronavirus continue to hurt the economy.”

USD/INR to see more gains

With the credit rating downgrade, the Indian rupee trades on the back foot against the US dollar so far this Tuesday’s Asian trading, around 75.50.

USD/INR is seen resuming the previous rebound and could regain the 76 barrier, as India’s bearish fundamentals overshadow the optimism driven by the economic re-opening.