Asia Economy

Moody's downgrade of India's outlook is 'erroneous,' Mark Mobius says

Key Points
  • "I think Moody's call was erroneous, I don't think it was called for because i see tremendous growth coming in India going forward," said Mark Mobius, founding partner of Mobius Capital Partners.
  • Moody's last week changed its outlook for India's ratings from "stable" to "negative," partly reflecting lower government and policy effectiveness in addressing weaknesses in the economy.
  • Other economists have also warned that India's growth could slip even more before turning the corner.
Mark Mobius, executive chairman of Templeton Emerging Markets Group, speaks during the Skybridge Alternatives (SALT) conference in Las Vegas, Nevada, U.S., on Wednesday, May 17, 2017.
Paul Morris | Bloomberg via Getty Images

Moody's decision to downgrade India's ratings outlook was "erroneous," veteran emerging markets investor Mark Mobius said on Wednesday.

Mobius, who has long been bullish on India, said he doesn't agree with the ratings agency's assessment that the country's growth will be subdued. Moody's said the change in its outlook for India's ratings from "stable" to "negative" partly reflected lower government and policy effectiveness in addressing weaknesses in the economy.

"I think Moody's call was erroneous, I don't think it was called for because I see tremendous growth coming in India going forward ... I believe that a lot of the reforms are going to really begin to kick in and have a big impact on the economy going forward," he told CNBC's "Global Squawk."

Mobius is the founding partner of Mobius Capital Partners.

India is undergoing a significant slowdown. Its economic growth hit a six-year low in the April-to-June period, during which the economy grew 5% from a year ago. An ongoing crisis in the finance sector has hamstrung lending and impacted investments, while recent policy reforms have left small-and-medium businesses reeling.

India's economy is also struggling to create enough jobs for its workforce.

Mobius is not the only one who doesn't share Moody's concerns about India. Economists at DSP Merrill Lynch, a Bank of America subsidiary that operates in India, said risks highlighted by the agency may be overstated.

The economists said in a report last week that they see the present slowdown in India "as cyclical rather than structural, as Moody's indicates." They added that the Indian central bank and government have taken measures to lift growth, so the country could experience "a shallow recovery in early 2020."

India's GDP growth downgrades

Still, other economists have warned that India's growth could slip even more before turning the corner. The country's largest public sector bank, State Bank of India, on Tuesday downgraded its growth forecasts for India, reported newspaper The Economic Times.

The bank said in addition to domestic challenges, a slowing global economy would drag India down along with it, according to the report. The bank cut its forecast for the current financial year from 6.1% to 5%, the report said.

India's central bank, the Reserve Bank of India, and other global institutions including the International Monetary Fund and the Asian Development Bank have also downgraded India's growth for this financial year.

— CNBC's Saheli Roy Choudhury contributed to this report.