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Moody’s rethink: Sense procrastinated

It is welcome and significant that Moody’s has revised and upgraded India’s credit rating, the first time since 2004. The revision, or, more accurately, the correction in Moody’s India’s credit outlook, does corroborate recent strong macroeconomic performance — India’s economy remains one of the best performing globally — and points to stronger macro-fundamentals going forward. It is also notable that bankruptcy resolution of highly stressed assets in the vexed banking sector has begun, and India’s global ranking when it comes to ease of doing business has considerably improved. There is much scope to significantly improve the rankings across several parameters with focused policy attention, especially regionally in the states and much-needed empowered of the main cities.

Keep ball rolling: Moody’s proffers a mood lifter

Credit rating agency Moody’s Investors Service upgraded Indian government’s debt ratings after almost 14 years. It simultaneously changed its outlook on the Indian economy to stable from positive. Microsoft cofounder Bill Gates has pertinently drawn attention to India’s disappointing progress in this area. Getting this reform right is as important as economic changes to future prosperity. On balance, Moody’s upgrade shows that optimism in India’s long term is well founded. But things won’t happen on autopilot. It is up to the Centre and state governments to see through transformational changes and actualize India’s potential.

A step up

Moody’s Investors Service, raised India’s sovereign credit rating by a notch, from “Baa3” to “Baa2”, and also revised upwards its outlook for the country from “positive” to “stable”. The upgrading by the influential American credit rating agency comes after nearly 13 years, during which time India has attracted cumulative foreign direct investment flows of about $ 250 billion and net portfolio investments of over $ 225 billion into its stock and debt markets. The big lesson India can learn from sovereign credit rating upgrades is to stay the course on macroeconomic stability. Concerns on it have been voiced in the past few months, with several state governments announcing farm loan waivers and the Centre under pressure to boost growth through fiscal stimulus measures.

Timely recognition: On the Moody’s upgrade

Moody’s decision to upgrade India’s sovereign credit rating by a notch after a gap of almost 14 years is undoubtedly a welcome recognition of the country’s enormous economic potential. And viewed in conjunction with the sizeable foreign exchange reserves, India’s overall capacity to absorb shocks is now seen as much better. The market reaction — with the stock indices and the rupee posting handsome gains intraday — signals that local businesses and overseas investors see the upgrade as a vote of confidence in the economy and the policy approach to economic management and reforms, especially at a time when momentum has slowed to a 13-quarter low.

Moody’s upgrade is recognition of BJP government’s reforms

Far less attention has been paid to the hard work put in by the Modi government to introduce reforms that will pay off in the medium term. These include the shift to GST that will unite the Indian economy, a new monetary policy framework focused on keeping inflation under control, a modern bankruptcy code that will help redirect capital from failing enterprises to successful enterprises, subsidy reforms based on the Aadhar system of biometric identification, and the recent recapitalization of ailing public sector banks.
(Compiled by Pankaj Anand)