The rating agency made a special mention of India's significant monetary tightening in 2013, coupled with some fiscal consolidation

New Delhi - Forecasting that India will clock the highest growth rate of 7-7.5 percent among G20 economies in 2015 and 2016, Moody's Investors Service on Thursday said the country is less exposed to external shocks, and the positive rating outlook reflects resilient growth and reforms momentum.

"India is less exposed to global risks because of its more resilient economic growth and the impact of positive policy reforms momentum," the rating agency said.

Emerging market sovereigns have diverging shock-absorption capabilities to withstand the risks that will continue to impact global credit quality in 2015-16, says Moody's in a report published on Thursday.

The report focuses on five Baa-rated sovereigns -- Turkey, Brazil, South Africa, India and Indonesia.

"India is less exposed to external shocks than the other sovereigns discussed here. The positive outlook on its Baa3 rating reflects our view that the relatively resilient growth and the policy reform momentum will slowly stabilise inflation, improve the regulatory environment, increase infrastructure investment and lower government debt ratios," it said.

In the report titled 'Baa-rated Sovereigns: Diverging Resilience to Developing Global Risks', Moody's believes the main external risk facing EMs is the potential for a prolonged risk aversion, prompted by hopes of normalisation of US monetary policy and possibility of a sharper-than-expected China slowdown.

It also talks of country-specific challenges exacerbating this external risk.

"In contrast, we forecast strong growth in India of around 7-7.5 per cent per year in 2015-16, the highest among the G20 economies, which is supported by lower oil prices that will reinforce gradual growth-enhancing reforms," it said.

Moody's said although India, South Africa and Brazil have weaker fiscal positions than Turkey and Indonesia, these governments are less reliant on foreign currency and non-resident funding (government external debt).

The rating agency made a special mention of India's significant monetary tightening in 2013, coupled with some fiscal consolidation, which is "an example of effective macroeconomic management that restored macroeconomic stability, albeit at the expense of near-term growth".

"However, coupled with structural reforms to address regulatory and infrastructure weaknesses, lower inflation and current account deficit outcomes have set the pace for monetary loosening which commenced in 2015. This active policy response to counter emerging risks contributed to the positive outlook," it said.

PTI