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Finmin raps Moody’s over India’s ratings
NEW DELHI: The finance ministry has raised strong objection to the Moody’s statements about India’s rating a day before a scheduled meeting with government officials.
NEW DELHI: The finance ministry has raised strong objection to the Moody’s statements about India’s rating a day before a scheduled meeting with government officials.
Moody’s had indicated on Tuesday it is unlikely to upgrade India’s sovereign credit rating anytime soon.
The ratings agency said the credit implications of reform measures such as the goods and services tax (GST) and a bankruptcy law will only become apparent in the medium term while weak private investments, slower fiscal consolidation and a high-level of bad loans in the banking sector constrain India’s sovereign rating.
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.
Moody’s currently has assigned the lowest investment grade (Baa3) for India with a positive outlook.
In April last year, Moody’s had 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.
Baa3 rating is a notch above ‘non-investment’ grade or junk-bond status.
The two other top rating agencies Fitch and Standard & Poor’s also have sovereign credit rating for India just above the junk-bond status.
“The due process has to be followed and you cannot jump the gun, if you are reaching a conclusion before interaction with the finance ministry and the other ministries, then somewhere we see the entire rating process, the methodology, was deficient and that is something we pointed out. So we expressed our serious concern about the methodology they were following,” economic affairs secretary Shaktikanta Das said on Thursday, speaking at the sidelines of a Brics infrastructure financing conference.
Das said government’s concern was only about the methodology and the process. “We would expect the interaction with the government and the finance ministry to take place, and then of course, they are a rating agency and they are free to arrive at their own conclusion,” he added.
On Moody’s statement regarding waiting for reforms to take roots, Das said the depth of reforms in India cannot be doubted, and it’s a unidirectional process: there will be no going back
“In the last several years, especially during the last two years, the number of reforms, the kind of reforms, the pace at which the reforms are being undertaken by the government, due weightage has to be given to (all) that. You cannot say that I will give zero weightage and I will wait till infinity to see that these reforms take roots,” he added.
