Global rating agency Moody's said Monday that the steep depreciation of the rupee against the dollar will not affect India's sovereign ratings negatively. It, however, added that private sector companies with huge overseas debts will be hurt by the slip in the value of the rupee.
Significant Indian rupee depreciation is insignificant for sovereign credit. The direct effect of depreciation on the government's own debt repayment capacity is limited, PTI reported, quoting Moody's Investors Service report.
The investors' service said in its weekly report that the impact of the sliding value of the rupee on India will be limited as only 7 percent of its total government debt (5 percent of the GDP) is placed overseas, and even the impact of the private sector exposure to the rupee depreciation will not affect India's ratings, since it amounts to just 16 percent of the GDP.
Individual firms' foreign debt repayment troubles are unlikely to lead to the sort of domestic demand collapse or deleveraging seen in countries with more significant private-sector external leverage, it said, according to a Reuters' report.
The Indian rupee had depreciated steadily over past weeks and had reached a historic low of 56.40 per dollar on Thursday. However, the rupee is on the recovery since three days and closed at 55.185/195 per dollar gaining 2.2 percent Monday, after India's central bank, the RBI, intervened to arrest its free fall in the Forex market.
According to Moody's analysts, India's debt is owed to multilateral or bilateral creditors and has a maturity profile that keeps annual repayments relatively low, while the country has $300 billion in foreign exchange reserves, Reuters reported.