Moody's Investors Service changed India's outlook to positive, saying there was an increasing probability that actions by policy makers will enhance the country's economic strength and, in turn, the sovereign's financial strength over coming years.
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Moody's said it expected structural advantages, supported by relatively benign global commodity prices and liquidity conditions, will keep India's growth higher than that of its peers over the rating horizon.
“There is an increasing probability that actions by policy makers will enhance the country’s economic strength and, in turn, the sovereign’s financial strength over coming years. India has grown faster than similarly rated peers over the last decade due to favorable demographics, economic diversity, as well as high savings and investment rates,” ” Moody’s has been quoted as saying in a Bloomberg report.
It said Moody's action "is signaling optimism in the efforts of Prime Minister Narendra Modi and central bank chief Raghuram Rajan".
Chief Economic Advisor Arvind Subramanian, meanwhile, said that Moody's outlook upgrade validated the government's reform thrust, better growth and fiscal discipline.
The ratings agency affirmed India's Baa3 rating, which is the lowest investment grade, and also cautioned against the problems in the country's banking system, which is constraining the credit profile, said a Moneycontrol report citing the press release.
"While policies are beginning to address each of these factors, the extent of likely improvement is as yet unclear," said the release, adding, "This poses sovereign credit risks because of the banking sector’s role in financing growth as well the government’s deficit through its purchase of government securities and the contingent liabilities due to government’s ownership of a major portion of banking sector."
The rating agency expects the recent steps taken to address inflation, keep external balances in check, simplify the regulatory regime for investors, increase foreign direct investment, and facilitate infrastructure development to reduce sovereign credit constraints to an extent.
However, it has said these are at early stages of design and have yet to be implemented.
"...The ability of policymakers to strengthen India's sovereign credit profile to a level consistent with a higher rating will become apparent over the next 12-18 months," it said.
A rating upgrade is possible only if in the coming months evidences emerge that the efforts made to enhance growth and stabilise economic and institutional reforms are indeed succeeding.
However, there will be a downgrade if economic, fiscal and institutional strengthening appeared unlikely, or banking system metrics remained weak or balance of payments risks rose, the release said.
With inputs from agencies
Thumbs up to PM Modi, RBI Rajan's efforts: Moody's upgrades India outlook to positive - Firstpost
Reuters Reuters
Moody's said it expected structural advantages, supported by relatively benign global commodity prices and liquidity conditions, will keep India's growth higher than that of its peers over the rating horizon.
“There is an increasing probability that actions by policy makers will enhance the country’s economic strength and, in turn, the sovereign’s financial strength over coming years. India has grown faster than similarly rated peers over the last decade due to favorable demographics, economic diversity, as well as high savings and investment rates,” ” Moody’s has been quoted as saying in a Bloomberg report.
It said Moody's action "is signaling optimism in the efforts of Prime Minister Narendra Modi and central bank chief Raghuram Rajan".
Chief Economic Advisor Arvind Subramanian, meanwhile, said that Moody's outlook upgrade validated the government's reform thrust, better growth and fiscal discipline.
The ratings agency affirmed India's Baa3 rating, which is the lowest investment grade, and also cautioned against the problems in the country's banking system, which is constraining the credit profile, said a Moneycontrol report citing the press release.
"While policies are beginning to address each of these factors, the extent of likely improvement is as yet unclear," said the release, adding, "This poses sovereign credit risks because of the banking sector’s role in financing growth as well the government’s deficit through its purchase of government securities and the contingent liabilities due to government’s ownership of a major portion of banking sector."
The rating agency expects the recent steps taken to address inflation, keep external balances in check, simplify the regulatory regime for investors, increase foreign direct investment, and facilitate infrastructure development to reduce sovereign credit constraints to an extent.
However, it has said these are at early stages of design and have yet to be implemented.
"...The ability of policymakers to strengthen India's sovereign credit profile to a level consistent with a higher rating will become apparent over the next 12-18 months," it said.
A rating upgrade is possible only if in the coming months evidences emerge that the efforts made to enhance growth and stabilise economic and institutional reforms are indeed succeeding.
However, there will be a downgrade if economic, fiscal and institutional strengthening appeared unlikely, or banking system metrics remained weak or balance of payments risks rose, the release said.
With inputs from agencies
Thumbs up to PM Modi, RBI Rajan's efforts: Moody's upgrades India outlook to positive - Firstpost
