Moody's praises government reforms, expects 6.7% GDP growth this fiscal

by Antonio Miles November 19, 2017, 0:59
Moody's praises government reforms, expects 6.7% GDP growth this fiscal

The agency said the reforms initiated by the Indian government could improve the business climate, productivity, stimulating foreign and domestic investment, and hence fostering strong and sustainable growth.

Prior to this rating action, HDFC Bank's BCA and ratings were constrained by India's previous sovereign rating of Baa3 given the bank's significant exposure to the government in common with other Indian banks.

"Now after 13 years we get the ratings upgraded and I am sure many who had doubts would seriously introspect on their positions", he said.

The Finance Minister, Shri Jaitley also addressed the senior fund managers and the key Financial Institutional investors and answered queries on various tax issues including GST, Fiscal policy, impact of the Bank Re-Capitalization Package on banks' NPAs, Insolvency and Bankruptcy Code (IBC) and so on.

Moody's on Friday upgraded the government's local and foreign currency issuer ratings to Baa2 from Baa3 and changed the outlook on the rating to stable from positive after a gap of 13 years.

In 2015, the rating outlook was changed to "positive" from "stable".

It is "encouraging to have global recognition" and "not something happening in isolation", he said. "It is a recognition and an endorsement of the process that India has undergone in the last three-four years where a number of structural reforms have placed India on a higher growth trajectory".

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The "Baa3" rating was the lowest investment grade - just a notch above "junk" status.

He also lauded the smooth transition of the Goods and Services Tax (GST).

The global ratings agency, however, cautioned that high debt burden remains a constraint on the country's credit profile.

Radhika Rao, an economist at DBS, said implementation of reforms, a subdued rural sector and weak investment have slowed economic growth while rising oil prices have raised the risks.

Within minutes of upgrade the Government's Chief Economic Advisor Arvind Subramanian tweeted, "Moody's India rating upgrade. 1".

Rejoicing at the news, the Rupee opened with its biggest gain in four years at 64.72/USD.


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