'Modi must keep his members in check or risk losing domestic and global credibility,' Moody's warned.
Moody's said India's current account deficit (CAD) has narrowed significantly from 4.8 per cent in 2012 to 1.4 per cent in 2014.
The note was authored by Faraz Syed, an associate economist with Moody's Analytics.
Revision in the context of an ongoing global review affecting financial institutions: Moody's
The RBI said there is an upward bias on inflation projection.
Government last month released Rs 265 crore to Air India to partially clear the interest burden to banks.
The ministry sought to allay the rating agency's concerns and said economic growth was on an upward swing.
Amid wholesale price-based inflation ticking up to 7.5 per cent year-on-year in May due to supply-side factors, the agency said it will cause further "headaches" at the RBI.
Global rating agency Moody's Investors Service on Thursday said the Centre's fiscal deficit, which in the first quarter of 2006-07 crossed 50 per cent of what was projected for the whole year, is a matter of concern.
The young Tilak Varma was included in the Indian team for the Asia Cup as the sixth specialist batter.
Central bank Governor Raghuram Rajan drew kudos from Moody's Analytics for his monetary stance.
"The 2017 state election results in India demonstrate broad-based popular support for the Indian government's policy agenda and will facilitate the implementation of further reforms, a credit positive for the sovereign," Moody's said in a statement.
A day after Fitch lowered India's local currency outlook to negative, international rating agency Moody's said it was also worried about the reversal of India's fiscal situation due to high oil prices and the lack of policy adjustment by the government. Moody's, however, said it was unlikely to change its investment grade rating to India's sovereign foreign currency rating or the domestic currency rating, which is below investment grade.
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The depreciation of the rupee, it said, reflects the wider CAD as well as lower net capital inflows.
The World Bank has projected that India's economy will grow at over 6 per cent in 2014-15 and 7.1 per cent by 2016-17 as global demand recovers and domestic investment increases.
Moody's Investors Service on Thursday upgraded India's ceiling for foreign currency bonds and government's foreign currency issuer ratings to "Baa3" from "Ba1".
The Modi administration has been unable to initiate key reforms.
Earlier, ratings agencies like Standard and Poor's and Fitch had threated to downgrade India's sovereign credit rating to junk grade in view of the worsening fiscal position of the government.
Moody's Investors Service on Thursday downgraded subordinated debt ratings of 11 Indian banks, including SBI, ICICI Bank and HDFC Bank.
Moody's Analytics had said Prime Minister Narendra Modi must keep BJP members in check or risk "losing domestic and global credibility".
Finance Minister Nirmala Sitharaman on Tuesday announced income tax relief for the middle class, a Rs 2 lakh crore outlay for job creation schemes over the next five years and a spending splurge for states run by her party's new coalition partners as she unveiled the Modi 3.0 government's first budget after the general elections.
Terming inflation as the biggest challenge before the Indian economy, Moody's said the Reserve Bank should focus on controlling the price rise and added that maintaining the balance between growth and inflation would a test for policymakers.
The current episode highlights the structural vulnerabilities in the liquidity management practices of Indian NBFIs
The Indian economy has bottomed out and the recovery is on the anvil although the days of 8 per cent growth are "gone", Moody's Analytics said.
'But their bowling is poor. Beyond Jasprit Bumrah, there is no one to actually support them in that bowling attack, and the CSK batters took them apart.'
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India's political infighting is denting business confidence.
Moody's Investors Services on Tuesday gave a speculative grade rating to India's domestic-currency debt on account of the government's heavy borrowings, while doubting sustainability of nine per cent GDP growth.
Former captain and coach Anil Kumble believes having totally different squads in limited overs and Test format is the way forward for India in international cricket.
Global rating agency Moody's on Tuesday warned that India's over 8 per cent economic growth may not be sustainable, saying it may average to 6.5 per cent in the coming years.
International credit ratings agency Moody's Investors Service changed its outlook for India's banking system to negative from stable due to concerns that an increasingly challenging operating environment will adversely affect asset quality, capitalisation, and profitability.
India would be a major beneficiary of softer oil prices among the G20 economies as the country is a major crude importer.
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Moody's said implementation challenges, in addition to affecting growth and government revenues, will impact corporates by lowering sales volumes and cash flows.
The land acquisition bill is a catalyst to investment and passing the bill will improve India's business environment.
The RBI in its first quarterly review of the credit policy kept the repo and reverse repo -- short-term rates at which banks lend and borrow from RBI--unchanged, retained economic growth projection at 6 per cent with an upward bias and projected inflation at around 5 per cent by March, 2010.
Moody's said it reflects India's weaker performance on fiscal.
Moody's said the government will face challenges in achieving its deficit target for the fiscal year ending March 2021, amid persistent structural and cyclical headwinds to growth.
Moody's, which cut its FY14 growth estimate to 4.5 per cent recently, said economic growth will be lowest in a decade.
Reliance Industries Ltd is expected to invest Rs 30,000 crore (Rs 300 billion), of the total Rs 70,000 crore (Rs 700 billion) announced, in its telecom arm Reliance Jio Infocomm over the next two years, credit rating firm Moody's said on Monday. The investment in the telecom business is a credit negative for RIL because RJio will not generate any EBITDA (an indicator of cash flows) for at least next 12 months, it said. Moody's added however that RJio will be a formidable competitor in the sector making it a credit negative for top telecom operators already in the field. "Based on RIL's March 2014 annual report, we estimate that it has already invested about Rs 400 billion (Rs 40,000 crore) in Reliance Jio, and we expect RIL to invest the next Rs 300 billion in Reliance Jio over the next two years," Moody's Investors Service said in a statement. RIL recently announced that it will launch commercial 4G telecom service of RJio in 2015 entailing investment of Rs 70,000 crore. RIL has said that RJio will initially cover about 5,000 towns and cities accounting for over 90 per cent of urban India, as well as over 215,000 villages in India and the target is to expand this to over 600,000 villages. Moody's said RJio will be a "formidable competitor in India's telecom sector" as it will enter the business with financial muscle. RJio's entry into highly competitive telecom sector is also credit negative for incumbent mobile operators and market leaders Bharti Airtel and Vodafone India because "it will undoubtedly result in intensified competition that will lead to declines in average revenue per user and margins". But, it also said that strong spectrum holding of incumbents; existing large subscriber-bases and well- established brand equity; offering 2G and 3G services (apart from 4G services being launched) as well as marketing and distribution architecture mitigate much of the near-term competitive threat from Reliance Jio for them. "Furthermore, given issues of language and literacy, large parts of rural India remain a substantially voice-based market where near-term demand for 4G services may be muted," Moody's said.
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