Rating upgrade recognises reforms by Modi govt, good news for industry

Congress leader Anand Sharma at World Economic Forum Annual Meeting in Davos in 2010

Moody's Investors Service upgraded its ratings on India's sovereign bonds for the first time in almost 14 years on Friday, saying continued progress on economic and institutional reform will boost the country's growth potential.

"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 and its large and stable financing base for government debt, and will likely contribute to a gradual decline in the general government debt burden over the medium term", Moody's said in a statement.

"#IndiaUpgrade by #Moody is a recognition of series of reforms undertaken by the government... Entire world is recognising "Sabka Saath, Sabka Vikas" Railways and Coal Minister Piyush Goyal said in a tweet.

New Delhi- The ruling BJP and the government on Friday cheered U.S. 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.

Meanwhile, the markets cheered the latest development with BSE's Sensex and 50-share Nifty closing with a more than 50 basis points (bps) gains.




"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", it said. In its biggest single-day surge in six weeks, the rupee gained 31 paise to end at a one-week high of 65.01 against the dollar.

In step with India rating upgrade, Moody's Investors Service today upgraded issuer ratings of nine state-owned firms, including oil producer ONGC, refiners IOC, BPCL and HPCL, power generator NTPC and gas utility GAIL. Whether or not it prompts an upgrade by rating agencies should be a secondary consideration.

Moody's pegged GDP growth at 6.7 per cent in FY18 and 7.5 per cent in FY19, with similarly robust levels of growth from FY20.

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. However, now they may consider investing in India and may see increased participation from them going forward. The measures should contribute to further strengthening of India's institutions, it said. "Maybe, the bank recap move convinced them that India is on the reform path and we mean business". "It will boost the inflow of foreign direct investment and is good for equities and the exchange rate". Earlier, the outlook was positive but on a lower rating, which indicated there were more chances of an upgrade than downgrade.

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