Govt invites Moody's for review of ratings

Enthused by an economic revival, the government has invited international rating agency Moody's for discussions over a possible review of India sovereign rating.

Moody's visit to North Block, slated for October 21, precedes a dialogue between the finance ministry and Standard & Poor next month.

According to a finance ministry official, it will be early to talk about an upward revision.

"The dialogue has just started and we will impress upon them the upbeat mood in our economy and the continuous nature of our fiscal reforms," the official said.

S&P had in June reaffirmed the junk status of India's local currency rating and also the BB foreign currency rating. The outlook, it said, remained negative, reflecting continuing difficulty for the government in addressing fiscal problems and structural reforms.

Moody's had, however upgraded the country's foreign currency debt ceiling in February by one notch to BA1, the highest level of the speculative grade ratings scale, due to an improvement in the external liquidity position.

Nevertheless, both agencies had expressed concerns over the fiscal deficit. While S&P said fiscal consolidation would be delayed to at least until after the general elections, Moody's said it was concerned about how the success in the external liquidity front could be over-shadowed by the weak fiscal situation.

While nothing remarkable has changed in the second quarter of the current fiscal, there has been a new-found optimism about achieving revenue targets, containing the fiscal deficit and a higher growth rate.

The finance ministry, in fact, expects the direct tax collections to exceed the budget estimates and also rein in the fiscal deficit to less than 5.6 per cent of the gross domestic product.

Chief Economic Advisor to the finance ministry Ashok Lahiri had in a recent media briefing said that GDP growth may exceed 7 per cent this year backed by a good monsoon and bumper harvest.

India had witnessed such growth of over 7 per cent last in 1996-97. Ministry officials further said that the government expenditure was under check and that revenue estimates for the full fiscal would be met.

Officials said that the strong foreign exchange reserves, which were close to $ 90 billion now, also lent confidence to the economy. These reserves would come handy when demand picks up and the domestic industry wants to import capital goods to expand, which in turn will fuel growth, they said.