Moody's Investor Service has said that India's debt level is "significantly" higher as compared with similarly rated countries like the Bahamas and South Africa.
The bond credit rating business has thus hit out once again at the Modi government, which has been trying hard to earn a sovereign upgrade.
Rating agencies like Moody's, Standard & Poor's and Fitch Ratings have ranked India just above "junk," because of high debt levels, which even though declined to 67.5% of GDP in 2016 from 84.7% in 2003, continues to remain a "key credit constraint."
As per Moody's notes accessed by Bloomberg , India's debt burden is higher than most of the countries ranked 'Baa,' a medium-grade credit risk with possibly speculative characteristics. Moody's has rated India at Baa3, the lowest in that category.
"We view ongoing central government deficit reduction as supportive of India's credit profile," Moody's said in a note. "However, the recent widening of Indian state deficits has more than offset the narrowing of the central government deficit."
Moody's, however, is upbeat about India's decision to implement a unified tax code for goods and services called the goods and services tax (GST).
"Over the medium term, goods and services tax will contribute to productivity gains and higher GDP growth by improving ease of doing business, unifying markets and will enhance India's attractiveness as a foreign investment destination. GST will also support higher government revenue generation through improved tax compliance and administration," it said.