New Delhi Citing reforms and steps taken towards ease of doing business, the Finance Ministry on Wednesday pitched for a rating upgrade with global rating agency Moody’s Investors Service.
The US-based rating agency, however, expressed concern over the state of bad loans in the banking sector.
At a meeting with economic affairs secretary Shaktikanta Das and other officials of the ministry, representatives from Moody’s are learnt to have said that a rating upgrade could be a reality when the benefits of reforms could be felt on the ground and the country’s banking sector stabilises.
In April last year, Moody’s changed India’s rating outlook to ‘positive’ from ‘stable’ citing reform momentum and had said that it could consider India for an upgrade in next 12-18 months.
India’s sovereign rating by Moody’s stands at ‘Baa3’, the lowest investment grade—just a notch above ‘junk’ status. During the meeting, the Ministry impressed upon Moody’s the government’s resolve to contain fiscal deficit at 3.5 percent of the gross domestic product in the current fiscal.
It highlighted the passage in Parliament last month of the goods and services tax (GST)—billed as the biggest tax reform since independence.
Armed with relaxation of thresholds for foreign direct investment (FDI) and inflation targeting monetary policy, the finance ministry wants Moody’s to upgrade the country’s rating, lifting its credit profile.
The government in the past 3-4 months has also secured Parliament’s approval for passage of the bankruptcy, Sarfaesi and debt recovery tribunal laws, besides the long pending GST.
Describing muted private investment and non-performing assets as speed-breakers amid slow reforms, Moody’s on Tuesday had said it could upgrade India’s rating in 1-2 years if it is convinced that reforms are “tangible”.
It said evidence of policymakers working towards a faster fiscal consolidation, reducing the debt-GDP ratio and addressing infrastructure and monsoon volatility challenges will determine an upgrade, going forward.