Moody’s Ratings said India’s Baa3 sovereign rating and stable outlook would remain consistent with a wider-than-budgeted fiscal deficit in the year ending March 2027 if higher energy prices push the gap to about 4.8% of GDP from the government’s 4.3% target.
In comments reported on June 29, Christian de Guzman said the pressure from energy prices would be temporary and that the shock was negative for most sovereign borrowers. Moody’s maintained its view that India would grow 6% through March 2027.
The agency said India’s post-pandemic fiscal consolidation supports the current rating, with the fiscal deficit down from a record 9.2% in fiscal 2021. Moody’s said the main rating constraint is debt affordability rather than short-term movement in the headline deficit, and it expects interest payments to absorb about 23% of combined federal and state revenue, compared with less than 10% for the median of similarly rated sovereigns.
India’s 2026-27 budget targets a revenue deficit of 1.5% of GDP and a primary deficit of 0.7% of GDP, while the Centre’s outstanding liabilities are estimated at 55.6% of GDP. Moody’s said its assessment includes stress on oil and shipping conditions, including oil above $95 a barrel in 2026 and possible disruption through the Strait of Hormuz into autumn.