GBP/INR edges up on Friday in early trading. Currently, one British pound buys 91.335, up 0.33% as of 6:25 AM UTC.
The price has been very volatile over the last two days. Yesterday, the sterling crashed from 91.332 to 90.735 after the Bank of England (BoE) saw a surprisingly mixed vote when it decided to maintain the interest rate. However, the pound bounced back and almost updated the November peak after Moody’s downgraded India’s rating outlook.
Moody’s Downgrades Outlook on India’s Rating
On Thursday, rating agency Moody’s downgraded India’s rating outlook from “stable” to “negative.” The rating agency expects the country’s economic growth to stay way lower than in the past.
The downgrade is based on the Indian government and policy inefficiency in handling the “economic and institutional weaknesses.”
India’s growth in the gross domestic product (GDP) decelerated to the lowest level in six years in the three months to June, when the economy added only 5% year-on-year. The crisis in the finance sector disabled lending and hit investments. Besides, India cannot keep pace with job demand while small-and-medium businesses (SMEs) are under pressure from recent policy reforms.
Moody’s analysts stated in their report:
“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 (NBFIs), have increased the probability of a more entrenched slowdown.”
Shortly after the rating agency published its verdict, the rupee became the worst performer among Asian currencies, while the Indian stock and bond markets saw modest losses.
The Indian government came with a reaction after Moody’s downgrade, saying that the economy continues to be among the fastest-growing major economies in the world. Thus, the country’s relative standing should be unaffected, government officials concluded.
According to a statement published by the finance ministry, the International Monetary Fund (IMF) said in its latest World Economic Outlook that the Indian Economy was expected to grow at 6.1% in 2020 and accelerate to 7% next year.