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Daily Current Affairs 02nd June 2020 Today’s Important Topic’s For UPSC Preparation
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1. MOODY’S DOWNGRADES INDIA’S RATING. 2. MINIMUM SUPPORT PRICES (MSPs) FOR KHARIF CROPS. 3. CABINET COMMITTEE OKAYS ₹50,000 cr. INFUSION FOR MSMEs. 4. SOCIAL STOCK EXCHANGE (SSE).
CATEGORIES Daily Current Affairs Daily News Articles/Editorials february 2020 January 2020
MOODY’S DOWNGRADES INDIA’S RATING
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CONTEXT
Rating agency Moody’s downgraded India’s foreign currency and local currency long term issuer ratings to Baa3 from Baa2, while maintaining a negative outlook.
WHAT DOES NEGATIVE OUTLOOK INDICATE?
The ‘negative’ outlook means that there are risks that there could be a lower rating, there could be another downgrade in future.Growth can continue to slow structurally to a much lower rate than in the past, deficits can continue to slip, and if the financial system does not improve and stabilise, that would further potentially exacerbate these growth risks.
WHY IT IS A CONCERN
Baa3 is the lowest in investment grade in Moody’s rating ladder. This means, India is just one notch above the non-investment grade or junk grade.Ultimately, it would be more costly and will crowd out the potential for spending on things that would help lift growth and improve livelihoods.It will increase government’s fiscal burden.
REASONS FOR DOWNGRADE
The country’s GDP to contract by 4% in the current financial year due to the shock from the pandemic and related lockdown measures. The GDP growth, however, is expected to pick up in the next fiscal to 8.7% and closer to 6% in the year after. Over the longer term, growth rates are likely to be materially lower than in the past, due to persistent weak private sector investment, tepid job creation and an impaired financial system, further deterioration in the government’s fiscal position. Slow reform momentum and constrained policy effectiveness have contributed to a prolonged period of slow growth, compared to India’s potential, that started before the pandemic. The lower economic growth to diminish the government’s ability to reduce its debt burden and the pandemic to increase the debt burden to rise to about 84% of GDP in the current financial year from 72%.