Moody's is the second international rating agency to reaffirm its outlook on India, after Standard and Poor's. S&P, had earlier this week, retained its stable outlook saying that the political uncertainty has already been factored in. "This type of circumstance was within the boundaries of what we had anticipated when the rating was lowered by two notches in June 1998," Moody's said in a statement.

The rating agency said it was maintaining India's `BA2' (speculative element) country ceiling on foreign currency bonds and notes assigned in June last. Referring to Congress party's efforts to form a government at the Centre, the Moody's said, "any coalition put together with a representation from smaller or regional parties is unlikely to be much more cohesive or long-lasting than the previous one." "Since thecurrent rating already incorporates the possibility of electoral changes, it will not be affected by which party ultimately form the government, unless a new government appears to have a better chance to remain in office for a full term," Moody's said.

Earlier, S&P had affirmed its foreign-currency and local-currency issuer credit ratings for the country, proving wrong the doomsayers which predicted ratings downgrade consequent to the fall of the 13-month-old Bharatiya Janata Party-led government which has plunged the country into a fresh round of political instability.

S&P had re-affirmed the double-B foreign currency and triple-B local currency long-term issuer credit rating, and the single-B foreign currency and the `A-3' local currency short-term issuer credit rating for the country, an agency release issued in London said. "India's reliance on weak coalition governments is factored in at current ratings levels," said the release.

"Frequent changes of Government are the inevitable consequence ofthe fragmentation of the country's voting patterns in recent years, the long-term decline of the once-dominant Congress party, and the heightened assertiveness of regional political groups," an S&P release earlier this week stated.

The fall of the Vajpayee administration last Saturday is consistent with the ratings' assumptions and does not, in itself, materially affect the country's credit worthiness, the release added.

Listing out the factors constraining India's ratings, S&P put the limited prospects for meaningful fiscal adjustment as the biggest constraint.

IMF warns India against instability
The International Monetary Fund has warned India against political instability saying that it was not good for the country's much-needed reform process for tackling the problems of poverty.

"We are in a new political situation and political instability is not the best environment for bold reforms and stimulation for private investment and then growth, IMF chief Michel Camedessus told a pressconference here on Wednesday. Expressing hope that the political situation in India would "stabilise soon" and the new government would undertake bold reforms for achieving the much-needed growth rate of seven to eight per cent, he said, " we would like very much to help the Indian government in this effort".