Moody\u2019s Investors Services upgraded India\u2019s sovereign rating for the first time in nearly 14 years on Friday, saying the country was poised for fast growth because of wide-ranging economic and institutional reforms by Prime Minister Narendra Modi\u2019s government.<\/p>\n
The US-based agency lifted ratings on India\u2019s sovereign bonds to Baa2 from its lowest investment grade of Baa3, and also changed the outlook for the country\u2019s rating to stable from positive.<\/p>\n
Sovereign credit ratings are a barometer of a country\u2019s credit profile and regulatory climate. A favourable rating helps governments and companies raise capital in global financial markets. Also, institutional investors rely on ratings for an indication of a country\u2019s socio-political environment before making investment decisions.<\/p>\n
The rating upgrade seen as an endorsement of a range of bold economic decision made by Prime Minister Modi, including the rollout of a landmark Goods and Services Tax that forged India into a unified market. It comes just weeks after the World Bank moved India up 30 places in its annual ease of doing business rankings.<\/p>\n
The good news will help the ruling BJP-led government tackle the narrative around the economy, which is growing at its slowest in three years, as it heads into a series of elections over the coming months. All markets including stocks, bonds and rupee rallied on the upgrade.<\/p>\n
\u201cWe believe that it is a belated recognition of all the positive steps which have been taken in India in the last few years, which has contributed to strengthening of Indian economy,\u201d finance minister Arun Jaitley told a press conference.<\/p>\n
\u201cMany who had doubts about India\u2019s reform process would now seriously introspect on their position.\u201d<\/p>\n
Shortly after the announcement, Modi led a chorus of ministers and policymakers who tweeted their reaction to the upgrade.<\/p>\n
Moody\u2019s downgraded China in May, followed by Standard and Poor\u2019s (S&P) which also cut the Asian giant\u2019s sovereign rating.<\/p>\n
But Moody\u2019s warned that India\u2019s rating could be downgraded if the management of government finances slipped.<\/p>\n
\u201cThe rating could also face downward pressure if the health of the banking system deteriorated significantly or external vulnerability increased sharply,\u201d it said.<\/p>\n
The other two key global rating agencies\u2014Standard and Poor\u2019s and Fitch Ratings\u2014have assigned India the lowest investment grade rating with stable outlook.<\/p>\n
\u201cThe decision to upgrade the ratings is underpinned by Moody\u2019s expectation that continued progress on economic and institutional reforms will, over time, enhance India\u2019s high growth potential\u2026,\u201d Moody\u2019s said about India, hoping to see a gradual decline in government debts over the medium term.<\/p>\n
\u201cIn the meantime, while India\u2019s high debt burden remains a constraint on the country\u2019s credit profile, Moody\u2019s believes that the reforms put in place have reduced the risk of a sharp increase in debt, even in potential downside scenarios.\u201d<\/p>\n
Credit Suisse in a statement said the rating upgrade for India is positive for bonds, especially for near term sentiment which has been weak.<\/p>\n
\u201cBut it might not translate into large inflows with most foreign investors already actively investing in India and bond market inflows limited by quotas,\u201d it added.<\/p>\n
Among other things, Moody\u2019s acknowledged improvements to the monetary policy framework; measures to address the overhang of non-performing loans (NPLs) in the banking system; and measures such as demonetisation, the Aadhaar system of biometric accounts and targeted delivery of benefits through the Direct Benefit Transfer (DBT) system.<\/p>\n
\u201cOther important measures which have yet to reach fruition include planned land and labor market reforms, which rely to a great extent on cooperation with and between the States,\u201d it said.<\/p>\n
However the rating agency maintained that most of these measures will take time for their impact to be seen, and some, such as the GST and demonetisation, had undermined growth in the near term.<\/p>\n
Moody\u2019s expects real GDP growth to moderate to 6.7% in the fiscal year ending in March 2018.<\/p>\n","protected":false},"excerpt":{"rendered":"
Moody\u2019s Investors Services upgraded India\u2019s sovereign rating for the first time in nearly 14 years on Friday, saying the country was poised for fast growth because of wide-ranging economic and institutional reforms by Prime Minister Narendra Modi\u2019s government. The US-based agency lifted ratings on India\u2019s sovereign bonds to Baa2 from its lowest investment grade of […]<\/p>\n","protected":false},"author":1,"featured_media":10424,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"inline_featured_image":false,"footnotes":""},"categories":[312],"tags":[],"class_list":["post-10423","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-india"],"_links":{"self":[{"href":"https:\/\/blastingskyhawk.com\/english\/wp-json\/wp\/v2\/posts\/10423","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/blastingskyhawk.com\/english\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/blastingskyhawk.com\/english\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/blastingskyhawk.com\/english\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/blastingskyhawk.com\/english\/wp-json\/wp\/v2\/comments?post=10423"}],"version-history":[{"count":1,"href":"https:\/\/blastingskyhawk.com\/english\/wp-json\/wp\/v2\/posts\/10423\/revisions"}],"predecessor-version":[{"id":10425,"href":"https:\/\/blastingskyhawk.com\/english\/wp-json\/wp\/v2\/posts\/10423\/revisions\/10425"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/blastingskyhawk.com\/english\/wp-json\/wp\/v2\/media\/10424"}],"wp:attachment":[{"href":"https:\/\/blastingskyhawk.com\/english\/wp-json\/wp\/v2\/media?parent=10423"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/blastingskyhawk.com\/english\/wp-json\/wp\/v2\/categories?post=10423"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/blastingskyhawk.com\/english\/wp-json\/wp\/v2\/tags?post=10423"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}