Focus of government is on what needs to be done for India's economy: Arvind Subramanian

Chief Economic Advisor Dr Arvind Subramanian on Thursday welcomed the decision of Moody's Investors Service to change India's outlook to 'positive', adding that the Prime Minister Narendra Modi-led government has focussed on working for the sake of the country's economy.

"The Moody's decision validates everything that the government has been doing. The focus of the government is on what needs to be done for the sake of the economy and we hope that there will be an investment grade upgrade but that is not what drives our policy forward," Dr Subramanian told the media.

"On inflation, our assessment is that our end-year target will be easily met and there will be room for the target to be surpassed. On infrastructure, I think it is a matter of implementation: the railways has an ambitious programme, the roads have an ambitious programme, and so on. The fiscal deficit will depend on how the economy and tax revenues perform," he added.

Dr Subramanian also justified the government's policy leaning towards public investment.

"The push for public investment is partly taking account of the fact that corporate balance sheets are still stressed and while it is starting to turn around, perhaps that process will be slow and underpins the strategy behind the budget," he said.

"If you analyse the fundamentals of oil, it points towards relatively stable prices. Geopolitical events could suddenly upstage all of that but that is an uncertainty that we all have to live with. As far as agricultural prices are concerned, there is a blip due to unseasonal rain. I think that the expectation is that this will not sustainably affect the medium term inflation, especially if the forecast for this year's monsoon is good," he added.

Meanwhile, Revenue Secretary Shaktikanta Das opined that a major influence in Moody's decision was made by the changes in taxation rules.

"The upgradation of the outlook on India from stable to positive by Moody's reflects the ground realities. This will increase and improve the investor's confidence in India around the world," he said.

"An important component of the change to a positive outlook is the whole change in the taxation environment that has been taking place over last several months," he added.

Moody's Investors Service has changed India's outlook to positive, by stating that there is an increasing probability the actions of policy makers will enhance the country's economic and financial strength over the coming years.

"There is an increasing probability that actions by policy makers will enhance the country's economic strength and, in turn, the sovereign's financial strength over coming years. India has grown faster than similarly rated peers over the last decade due to favourable demographics, economic diversity, as well as high savings and investment rates," Moody's was quoted as having stated.

However, Moody's will only upgrade its rating if it has evidence that the efforts to enhance growth and stabilise economic and institutional reforms are succeeding.