NPA resolution, GST will ease govt’s debt burden: Moody’s
Credit rating agency Moody’s Investors Service on Thursday said if the wide-ranging reforms proposed by India such as the goods and services tax (GST), the fiscal framework following the Fiscal Responsibility and Budget Management Act (FRBM) Committee recommendations and non-performing assets (NPA) resolution measures are successfully implemented, it would gradually ease the government’s high debt burden, which represents a key constraint on the sovereign’s credit profile.
Moody’s on Wednesday projected India’s economy to accelerate to grow at 7.5% in 2017-18 and 7.7% in 2018-19 as the government has been able to limit the negative impact of last year’s demonetisation on the economy.
On the GST which is scheduled to be implemented from 1 July, Moody’s in a report released on Thursday said the short-term impact of GST reforms will be muted, but the long-term benefits will include higher productivity growth, due to efficiency gains in business operations, greater investment, as inter-state tax barriers are reduced, and an expanded revenue base with enhanced tax compliance.
Moody’s said the FRBM framework that has sought to reduce India’s debt to GDP ratio to 60% by 2022-23 offers an opportunity to anchor fiscal consolidation by setting a medium-term target for the country’s debt burden. “Combined with higher nominal GDP growth, a credible fiscal framework that fosters fiscal responsibility at both the central and state government levels would contribute to the gradual reduction of India’s high debt burden,” said William Foster, a Moody’s vice-president and senior credit officer.
On the proposed banking sector reforms, Moody’s said recent measures to address high NPAs and the promulgation of the Insolvency and Bankruptcy Code 2016 are credit positive for the sovereign, because they provide a clearer framework.
“However, outstanding structural issues remain within the banking system, particularly within public sector banks, which further constrains banks’ abilities to finance potential new investment and, therefore, weighs on private investment,” it added. It has. But it is still a relatively small contributor to the company’s overall business. We have got a huge business in the US that is still 50% of our total business. India is less than 5% of our business but it is growing at a good clip. It is a strategic priority for us for the number of people here. There is enormous upside opportunity in this market. First and most importantly, we still have a lot of upside opportu300