Moody’s upgrades India’s rating, backs reform push
PM welcomes move; stock markets, rupee end stronger
NEW DELHI: Moody’ s Investors Services upgraded India’ s 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’s government.
The US-based agency lifted ratings on India’ s sovereign bonds to Baa2 from its lowest investment grade of Baa3, and also changed the outlook for the country’s rating to stable from positive.
Sovereign credit ratings are a barometer of a country’s credit profile and regulatory climate. A favour able rating helps governments and companies raise capital in global financial markets. Also, institutional investors rely on ratings for an indication of a country’ s socio-political environment before making investment decisions.
The rating upgrade is 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.
The good news will help the ruling BJP-led government tackle the narrative around the economy, whichis growing a tits 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.
“We 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 ,” finance minister ArunJaitley told a press conference. “Many who had doubts about India’ s reform process would now seriously introspecton their position .”
Shortly after the announcement, Modileda chorus of minister sand policymakers who tweeted their reaction to the upgrade. “Moody’s believes that the @narendramodi government’s reforms will improve business climate, enhance productivity, stimulate foreign and domestic investment, and ultimately foster strong and sustainable growth ,” Mo di tweeted.
Moody’ s down graded China in May, followed by Standard and Poor’s (S&P) which also cut the Asian giant’s sovereign rating.
But Moody’s warned that India’ s rating could bed owngraded if the management of government finances slipped.
“The rating could also face downward pressure if the health of the banking system deteriorated significantly or external vulnerability increased sharply,” it said.