US based credit rating agency Moody said on Thursday that it will be weighing the ongoing India-Pakistan tensions, while reviewing India’s sovereign credit rating.
Officials from Moody’s met representatives of India’s finance ministry earlier in the day as part of their routine engagement ahead of the next rating review. The agency has currently assigned India its lowest investment-grade rating of ‘Baa3’ with a stable outlook.
“The rating agency will consider India-Pakistan conflict in its sovereign rating assessment,” a source told PTI.
Last month, Moody’s said that rising tensions between the two nuclear-armed neighbours are unlikely to cause a major economic disruption in India. However, it flagged the risk of setbacks for Pakistan, including pressure on its already-depleting foreign exchange reserves and further strain on growth.
The agency also highlighted India’s limited economic exposure to Pakistan, which accounts for less than 0.5% of India’s total exports in 2024, as a reason why economic fallout from such tensions would likely be limited.
However, the financial services agency did lower its GDP growth forecast for India for 2025 to 6.3%, down from 6.5%, citing global headwinds such as increasing US policy uncertainty, trade barriers, and broader geopolitical stress.
The financial services company had earlier said that costs for investors and businesses might increase as they take new geopolitical dynamics into account when deciding where to invest, expand operations, or source goods.
India-Pakistan’s tensions escalated after the April 22 attack in Pahalgam, Kashmir, where 26 civilians were killed by terrorists reportedly trained in Pakistan. India maintains that Pakistan continues to harbour UN-designated terrorists, pointing to the presence of senior Pakistani military officials at the funerals of militants killed in Indian military operations on May 7.
Pakistan’s sovereign rating remains deep in junk territory with a ‘Caa2’ grade from Moody’s, indicating extremely high credit risk.
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