Agencies
New Delhi, Nov 17: Moody’s Investors Service Friday upgraded its ratings on India’s sovereign bonds from its lowest investment grade of Baa3 to Baa2, a notch higher. The last time the ratings were upgraded was 14 years ago — in January 2004. Moody’s said continued progress on economic and institutional reform will boost the growth potential of India.
While Finance Minister Arun Jaitley welcomed the upgrade as “a belated recognition of all the positive steps taken in the last few years”, the Opposition Congress played the upgrade down and said both Modi and Moody’s have “failed to gauge the mood of the nation”. Some reports also speculated whether Moody’s had bowed to pressure Modi built through harsh criticism of its assessment and efforts to delegitimise it.
Modiji and Moody’s ‘Jodi’ ha[s] failed. Hunger deaths, farmers shootings, agri distress, job losses, lowest credit ratings, rising prices, plunging exports, flawed GST, demonetisation disaster, stagnant growth are the real indices to measure it.
randeep singh surjewala | congress spokesperson (on twitter)
We should celebrate Moody’s upgrade by holding a midnight ceremony in Central Hall of Parliament and damn Standard and Poor.
yashwant sinha | senior bjp leader (on Twitter)
It is a belated recognition of all the positive steps taken in the last few years. 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.
arun jaitley | union finance minister
The agency said it was also changing its rating outlook from positive to stable as risks to India’s credit profile were broadly balanced. All Indian markets, including stocks, bonds and rupee rallied on the ratings upgrade.
Last year, India had lobbied hard with Moody’s for an upgrade, but failed. The agency raised doubts about the country’s debt levels and fragile banks, and declined to budge despite the government’s criticism of its rating methodology.
Moody’s separately raised the ratings of top Indian lender State Bank of India, HDFC Bank as well as state-run energy firms, NTPC, NHPC, Gas Limited and the National Highways Authority of India, potentially lowering their borrowing costs.
Moody’s said the recently-introduced goods and services tax (GST) will boost productivity by removing barriers to inter-state trade.
“[W]hile India’s high debt burden remains a constraint on the country’s credit profile, Moody’s believes that the reforms put in place have reduced the risk of a sharp increase in debt, even in potential downside scenarios,” the ratings agency said.
Moody’s said it expects India’s real GDP growth to moderate to 6.7 per cent in the fiscal year ending in March 2018 from 7.1 per cent a year earlier.
The agency also raised India’s local currency senior unsecured debt rating from Baa3 to Baa2 and its short-term local currency rating from P-3 to P-2.
Moody’s noted that while a number of key reforms remain in the design phase, it believes those already implemented will advance the government’s objective of improving the business climate, enhancing productivity and stimulating investment.
“Longer term, India’s growth potential is significantly higher than most other Baa-rated sovereigns,” the ratings agency added.
Reacting to the rating upgrade, Jaitley said the government will “maintain fiscal discipline” and stick to the path of fiscal consolidation. The government, he said, has targeted keeping fiscal deficit to 3.2 per cent of gross domestic product for the year ending in March 2018 and to reach 3 per cent in 2018-19. The finance minister expressed confidence that existing policies will let India “glide” to a stronger financial position.
Stocks build on upgrade
Mumbai: India’s sovereign credit rating jump did a world of good to investors’ confidence as both Sensex and Nifty Friday ended with more than 0.5 per cent gains, powered by financial and metal stocks. The rating action by Moody’s became apparent right in the opening session that saw the BSE index shoot up 414 points at one point. But the momentum failed to carry on as investors rushed in to shave profit as the index closed the day at 33,342.80, up 235.98 points — or 0.71 per cent. The gauge had rallied 346 points in the previous session. 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. For the week, the Sensex eked out gains of 28.24 points, or 0.08 per cent, but the Nifty dropped 38.15 points, or 0.36 per cent.
