This is the first time in the history of America, the world's largest economy, that three major rating agencies have cut its rating. That is, it was not given a top tier credit rating. moody's has reduced the US sovereign credit rating from 'AAA' to 'Aa1'. The most interesting thing is that since 1919, moody's has been giving top ratings to America. However, it did give America a negative outlook in 2023.
Similarly, S&P Global Ratings removed the 'AAA' rating from America in 2011, while Fitch Ratings also reduced America's rating from triple 'A' to 'AA+' from august 2023.
Rating reduced due to rising debt
Actually, the biggest reason for the credit rating agency reducing the US rating is the rising debt. moody's says that America's debt has increased rapidly in the last decade. In the year 2024, America's debt had increased to more than 35 trillion dollars, while its GDP is only about 29 trillion dollars.
moody's estimates that America's government deficit i.e. federal deficit can come up to 9 percent of GDP by 2035. Last year it was 6.4 percent. In such a situation, the question arises that what effect can the reduction of America's rating by rating agencies have on india and the rest of the world?
What effect?
Due to such downgrading by the rating agency, the US government may have to pay more interest than before. Investors decide how much loan will be safe to give by looking at the rating of a country or company. Apart from this, foreign investors have confidence in the indian market at this time. But if the trend of global investors changes, then its indian market can also see losses. Overall, America will now have to reduce its debt and deficit to improve its rating..jpg)
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