Is there a risk that India sovereign ratings could be downgraded due to COVID-2.0?

It is hard to say, but rating agencies like Moody’s, S&P and Fitch have been consistently warning India about a possible downgrade if macros are not quickly put in order. Not much is being discussed about this possible downgrade but it is true that COVID-19 crisis has made India vulnerable to a sovereign downgrade.

Experts warn that, apart from the pandemic, the high government debt, unsustainable fiscal deficit and slow progress on vaccinations are all factors. With government debt as a share of GDP jumping to 90%, warnings of downgrade are increasing. India is currently at BBB-, the lowest investment grade and any downgrade will make India a speculative asset class.