Moody's rating goes against people's mood: Sibal

Lucy Hill
November 19, 2017

"The decision to upgrade the ratings is underpinned by Moody's expectation that continued progress on economic and institutional reforms will, over time, enhance India's high growth potential".

Moody's Investors Service has hailed wide-ranging economic and institutional reforms of the BJP government over the last three, citing them as the big reasons for the agency's first upgrade of India's sovereign rating in nearly 14 years. "Many who had doubts about India's reform process would now seriously introspect on their position", Finance Minister Arun Jaitley said in response.

The BSE Sensex, which opened at 33,388.47 points, was trading at 33,471 points (at 10.44 a.m.), up 366 points or 1.12 per cent from the previous day's close at 33,106.82 points.

European stocks were subdued in early trade as the euro strengthened against the dollar and investors digested comments by ECB President Mario Draghi at the Frankfurt European Banking Congress. The question, naturally, arises: Why did it take so long to upgrade the ratings on bonds issued by the Indian government, which ultimately reflect the strength of its economy?

New Delhi- The ruling BJP and the government on Friday cheered USA credit ratings agency Moody's upgradation of India's sovereign ratings, with party President Amit Shah and several ministers tweeting that it was a recognition of all the good work done by the NDA. The markets cheered the move.

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Overall inflation rate in the country has declined markedly in recent times and forex reserves have increased to all-time highs, creating significant policy buffers to absorb potential shocks, Moody's said.

Yesterday, for the first time in last 14 years, they have upgraded India's credit rating, and this is indeed big news. "In fact, always the question was why the rating upgrade wasn't happening", said Mr Kumar. "CII hopes that the other rating agencies will soon follow with similar rating upgrades".

Atul Pandey, Associate Partner, Khaitan and Co said the present government in last three years has carried out several economic regulatory reforms which has attracted more foreign investment and has also eased doing of business in India. While GST and demonetisation have undermined growth over the near term, real GDP growth will rise to 7.5 per cent in 2018-19 as disruption fades, it said.

With the government committed to fiscal consolidation, India might not have to wait for 13 long years for next sovereign upgrade by a rating agency, said a SBI report. "Maybe, the bank recap move convinced them that India is on the reform path and we mean business".

"Government efforts to reduce corruption, formalize economic activity and improve tax collection and administration, including through demonetization and GST, both illustrate and should contribute to the further strengthening of India's institutions", the rating agency said.

Other reports by TheDailyFarc

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