International credit-rating agencies, which have spared no punches in criticising the Indian economy's management for stalled reforms and precarious public finances, hailed the government's big-bang reforms initiatives announced last week, but an upgrade in India's sovereign ratings appeared bleak.
"If the measures proposed by the government are implemented, we would expect a medium-to-long-term positive impact on the macro-economy," S&P director for sovereign ratings Takahira Ogawa said in a note on Monday.
Prime Minister Manmohan Singh silenced his critics on Friday with an action packed booster shot for reforms, boldly ushering foreign direct investment (FDI) in the retail, aviation, broadcasting and power sectors, a day after he bit the bullet on fiscal discipline by the raising diesel prices by Rs. 5 a litre and capping the sale of subsidised cooking gas cylinders.
In June, in a report titled 'Will India be the first BRIC fallen angel?' S&P had warned that India ran the risk of losing its "investment grade" status, which will erode and, perhaps even spoil, its attractiveness as a global business hotspot and investment destination.
"At this stage it is still uncertain whether these measures can be implemented or not," Ogawa said.
Fitch Ratings was equally cautious in its observations about government's reformist moves.
"There is still considerable execution risk given the Congress-led coalition's divisions and recent track record of policy reversals," said Fitch.
Moody's echoed similar views. "The effect of the announced reforms on the government's credit profile is minimal because they are either too small to have material sovereign credit benefits or carry implementation or rollback risks that outweigh any credit positive benefits," Moody's said in a note.