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“Moody’s has changed rating outlook to positive from stable and affirms Baa3 rating. The upgrade in outlook is significant but we’ve to do more,” Finance Minister Arun Jaitley tweeted.
Early on Thursday morning, Moody’s Investors Service revised India’s sovereign rating outlook to ‘positive’ from ‘stable’ on the back of actions by the Narendra Modi government, but maintained the rating at the lowest investment grade.
Finance Secretary Rajiv Mehrishi told reporters on Thursday he hoped there would be a rating upgrade soon. “It affirms the positive programmes and policies announced in the Budget. So, on the whole, it is good.”
Minister of State for Finance Jayant Sinha said the National Democratic Alliance (NDA) government had restored the faith of investors and rating agencies on the growth outlook of the economy.
“Moody’s decision continues to reaffirm that rating agencies, global investors and our own domestic businesses have faith in India’s growth outlook and our financial strength as a sovereign.” He reiterated that the global economic situation had benefitted India, including declining global oil prices. “Those macroeconomic factors are very much in our favour and now what we have to work on is to ensure that sector by sector, industry by industry growth picks up so that the benefits follow through to consumers and businesses as well.”
Chief Economic Advisor Arvind Subramanian said in a media briefing the government’s Budget strategy had paid off.
“This upgrade of the outlook validates the direction of the government’s reform programme. It also confirms something that we have been saying for sometime now, that the growth prospects and the macroeconomic prospects for the economy are improving. The Budget was successful in being able to push for public investment and growth without compromising the commitment to fiscal discipline. That is an important point because that’s what credit rating agencies focus on. It kind of also validates the strategy in the Budget.”
Subramanian reiterated that the end-year inflation target of six per cent would be met. “That target is set to surpass what we have said in the Budget, at 5-5.5 per cent. On infrastructure, it’s now a matter of implementation. The Railways has an ambitious programme. So that’s a matter of implementation. And the third thing is fiscal discipline, it could be determined by the policies that we have put in the Budget and it will now also depend on how the economy performs, how tax revenues perform. We hope there is an investment upgrade, but that will not drive policies.”
On the low oil prices, the chief economic advisor said the commodity might see a slight volatility in the coming year, but a huge increase or decrease wasn’t expected.
“On agricultural prices, I think there is a blip because of unseasonal rains. For the moment, the expectation is that this will not sustainably affect the medium-term inflation target. Especially for this year if the monsoon forecast is good, you have an offsetting impact. So, for the moment, we have to view it as a temporary blip and not a permanent shift in the inflationary process.”
