Rating upgrade recognises series of reforms by Modi govt: Min

Marco Green
November 18, 2017

Debt market had received a whopping Rs 1.44 lakh crore and equity market Rs 51,755 crore of foreign investments in the current year even before the rating upgrade.

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.

Describing the cash ban as a positive factor for the Indian economy "should raise some eyebrows", Shilan Shah, India economist at Capital Economics, wrote in a research note. Additional inflows might help aid in the Indian rupee.

Reports suggest that the global rating company said the reforms undertaken by the government would lead to an enhanced business environment, fuelling the foreign and domestic investment, and subsequently the growth momentum.

The credit ratings agency raised India's rating by one notch to Baa2 from Baa3.

"If you had to choose a time for an upgrade, then this was a singularly bad time where I think the uncertainties are actually high", said Pronab Sen, former chief statistician of India and a country director for think-tank International Growth Centre, who warns that between demonetisation and GST effects, the immediate prognosis for the economy is uncertain.

Stating that the upgrade will boost capital flows and allocations, she said,"it will also help in improving the availability and access to overseas capital for our firms". "Usually, rating upgrades are anticipated 30-60 days in advance and the effect of the change lingers on till 30-60 days after the event".

India's sovereign credit rating was last upgraded in January 2004 to Baa3 (from Ba1).

Describing the rating upgrade, which came after a gap of 13 years, as a "re-affirmation of how the world views India, and a long pending step", State Bank chairman Rajnish Kumar said this is "a thumbs up to the various reform measures and will bring the cost of foreign borrowings automatically down". "After destroying India's economy, the Modi government is clutching at straws to claim lost credibility", he tweeted.

Rana Kapoor, MD and CEO Yes Bank said the long overdue sovereign rating upgrade for India is an endorsement of institutional and structural transformations ushered in by the government in the last few years while maintaining fiscal prudence.

This was earlier vindicated by the sharp jump in India's Ease of Doing Business ranking. This rating has a major impact on the bond markets. "It will also provide relief to corporates on their borrowing costs", said George Alexander Muthoot, MD, Muthoot Finance.

This is published unedited from the ANI feed.

Other reports by Click Lancashire

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