Monday, 11 December, 2017

BJP, government cheer Moody's ratings upgrade

Moody's upgrades India's rating But is it too early to celebrate Moody's Upgrades India's Ratings; Amit Shah Pats Modi's Back
Heather Davidson | 19 November, 2017, 02:28

Moody's Investors Service upgraded its ratings on India's sovereign bonds for the first time in almost 14 years on Friday, saying continued progress on economic and institutional reform will boost the country's growth potential. Moody's had last upgraded India's rating to "Baa3" in 2004.

Stating that reforms will foster sustainable growth prospects, the US-based agency said the government is mid-way through a wide-ranging programme of economic and institutional reforms. "We believe that the upgrade is a belated recognition of all our positive steps that have contributed to the strengthening of the Indian economy". Moody's also upgraded India's local currency senior unsecured rating to Baa2 from Baa3 and its short-term local currency rating to P-2 from P-3.

"Moody's has upgraded the government of India's local and foreign currency issuer ratings to Baa2 from Baa3 and changed the outlook on the rating to stable from positive", the global rating agency said in a release on Friday, adding that the government's wide-ranging economic and institutional reforms will improve the business climate and foster strong and sustainable growth.

"The bond yields, Indian rupee and stock markets have already reacted favourably".

"It clearly shows that the economy is turning the corner and poised for a big leap forward, highlighting the vast potential that India offers as a global investment destination", he said.

Other global rating agencies were, however, more cautious in their outlook. HPCL said the firm would benefit from both lower borrowing costs and a stronger rupee.

The government and the Finance Ministry had been seeking an upgrade for the past few years, citing the high economic growth and improved fiscal deficit. One notch higher than this is Baa2).

The 50-share Nifty raced past the key 10,300-mark during the day, only to come off the high and end at 10,283.60, a gain of 68.85 points, or 0.67 per cent.

Upgradation of India's credit rating by Moody's is a big news, because it has been done after 14 years, and done at a time when business analysts and observers are severely questioning PM Modi's decisions to implement GST and ban 80% of currencies overnight. Recognition for recent economic reforms in India & 5000 year track record of no default. On Friday, the government cheered the upgrade as an endorsement of its reforms. "Entire world is recognising "Sabka Saath, Sabka Vikas" Railways and Coal Minister Piyush Goyal said in a tweet. Moody's cautioned that a material deterioration in fiscal metrics and the outlook for general Government fiscal consolidation would put negative pressure on the rating.The rating could also face downward pressure if the health of the banking system deteriorates significantly or external vulnerability increases sharply.

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