 "Eyeing ratings upgrade, Finance Ministry to list out economic achievements to Moody's")
Finance Ministry officials are expected to pitch a ratings upgrade to Moody’s when its representatives visit this week by stressing upon the various reform initiatives taken by the Narendra Modi government, including the goods and service tax, bankruptcy code, and inflation targeting through the monetary policy committee, among others.
Senior officials who are likely to interact with Moody’s representatives, including Economic Affairs Secretary Shaktikanta Das and Chief Economic Advisor Arvind Subramanian, are also expected to pitch India as the fastest growing major economy in the world, and the government’s efforts to attract foreign investment.
Officials say that the case for a ratings upgrade has been the strongest in years, given the various actions, both legislative and executive, that have taken place on the economic and fiscal front.
The main focus of Finance Ministry’s pitch will be the passage of constitution amendment to GST, sources say, along with the efforts to ensure the implementation of the nationwide tax reform. Already, 17 states have ratified the constitution amendments and the government is in the process of setting up the planned GST council.
The Fitch representatives will also be informed about the setting up of the Monetary Policy Committee (MPC), whose members are expected to be announced soon. The MPC will set interest rates based on the retail inflation target of 4 per cent (+/-2 per cent) and will consist of six members, three nominated by the government and three from the Reserve Bank of India. The Governor, Urjit Patel, will head the committee and have a casting vote.
India’s gross domestic product (GDP) grew at 7.1 per cent in the April-June quarter, the slowest in six quarters. But officials expect the data for the remaining nine months of 2016-17 to show a rosier picture. GDP growth was 7.6 per cent in 2015-16, and 7.9 per cent in the January-March quarter.
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Additionally, The relief from reduced retail inflation in August — its lowest level since March — was marred by a sharp fall in industrial production in July, the figures for which were released last week. The index of industrial production (IIP) for July was 2.4 per cent lower year-on-year, the bleakest in eight months. Consumer Price Index (CPI)-based inflation for August was 5.05 per cent, the lowest since March. It had touched a 19-month high in July.
However, analysts expect that IIP will improve for the remainder of the year with consumption picking up due to the Seventh Pay Commission as well as increased government spending on public infrastructure.
Moody’s has a ‘Baa3’ rating on India with a positive outlook. Of the other two big global ratings agencies, Fitch has a ‘BBB-’ rating with stable outlook, while Standard & Poor’s has ‘BBB-’ with positive outlook.