The action looks beyond the present slowdown in economic growth and a surge in bank bad loans, and bets on India’s medium- and longterm growth potential.
The markets cheered, with the rupee, bonds and equities all reacting positively. Although the rupee and the sensex gained over 1% intraday, both retracted some of their gains toward the close.
The move comes close on the heels of the sharp improvement in India’s ranking in the World Bank’s ease of doing business survey.
Moody’s gives govt ammo to battle oppn
The ratings upgrade by Moody’s could position India as an attractive investment destination, apart from making it easier for companies to raise resources abroad. The ratings agency highlighted reforms such as the Goods and Services Tax (GST) and demonetisation, which it said would lead to greater formalisation of the economy. Besides upgrading India’s ratings, Moody’s also revised the outlook from positive to stable, indicating that the next upgrade might take a while coming.
“The government is midway through a wide-ranging programme of economic and institutional reforms. While a number of important reforms remain at the design phase, Moody’s believes that those implemented to date will advance the government’s objective of improving the business climate, enhancing productivity, stimulating foreign and domestic investment, and ultimately fostering strong and sustainable growth,” the agency said.
The ratings action comes days ahead of the crucial Gujarat assembly elections where the opposition Congress has sought to portray GST and demonetisation as triggers for the slowdown. The Moody’s upgrade is expected to provide ammunition to the government to blunt criticisim about its handling of the economy after growth slowed to a three-year low of 5.7% in the June quarter and rollout issues linked to GST triggered a political backlash.
Industry, stock brokers and bankers said the revised rating would accelerate fund flow to the country. “This move will now give India access to cheaper capital funds for investment, helping accelerate growth,” said Shikha Sharma, MD & CEO, Axis Bank. So far India’s cohorts in the rating table were countries like South Africa and Indonesia. With this upgrade, India has moved into the same league as Italy, Spain, Oman and the Philippines.
Source : timesofindia