NEW DELHI: The Narendra Modi-led government, which in 2016 had rejected the poor ratings by global rating agencies for not recognising India’s efforts towards for growth and reforms, on Friday accepted an improved rating as ‘belated recognition’ of the reforms undertaken in the past few years.
Last year, global rating agency S&P had ruled out an upgrade for India in the next two years and Moody’s too was not in favour of an upgrade of India’s rating due to the slow private investment and rising NPAs.
Moody’s Investors Service on Friday upgraded India’s local and foreign currency issuer ratings to Baa2 from Baa3 and changed the outlook on the rating to stable from positive. The upgrade is recognition of major economic and institutional reforms undertaken by the government.
The upgrade came after 13 years. India’s sovereign credit rating was last upgraded in January 2004 to Baa3 (from Ba1). ‘Baa3’ was the lowest rating in the investment grade - just a notch above the ‘junk’ status.
Finance minister Arun Jaitley reiterated that the reform agenda will continue with emphasis on higher spending on infrastructure and in rural areas. The finance minister also stressed that the government was committed to maintaining the fiscal discipline. “…intends (government) to stay the course on fiscal consolidation in the medium term,” said Jaitley.
He listed out the various economic reforms initiated by the NDA government and said the next step would be to provide thrust to implementation, especially in infrastructure building and spending in rural areas.
Jaitley hoped that foreign institutional investors (inflows), which are already positive, would continue to remain after the upgrade by Moody’s.
Rating upgrade recognises India’s commitment to macro stability, which has led to low inflation, declining deficit and prudent external balance, a finance ministry statement said.
It noted that it reflects on the government’s fiscal consolidation programme, which has
resulted in reduction of the deficit from 4.5 per cent of the GDP in 2013-14 to 3.5 per cent in 2016-17 and its consequential sobering impact on general government debt.