 "Moody’s")
Moody's Investors Service has again ruled out an immediate rating upgrade for India from the current lowest investment grade with positive outlook. However, the rating agency said it would consider an upgrade if the reform momentum was sustained, ensuring macroeconomic stability, higher levels of investment and more favourable fiscal dynamics.
After its rating committee met on Monday to discuss India's ratings, Moody's said in a statement that measures taken by the government, including efforts to implement the Goods and Services Tax (GST) and reform of the bankruptcy code, together with further reforms over time, might lead to a rating upgrade.
However, there was no word on the demonetisation move of the government.
Earlier this month, Standard & Poor's had ruled out any upgrade for a couple of years. Before this, Moody's had also not changed India's ratings, despite the finance ministry pitching for an upgrade.
All three rating agencies - Moody's, S&P and Fitch - have assigned India the lowest investment grade.
Moody's said the economic and institutional reforms introduced since the positive outlook was assigned, and potentially forthcoming, continued to offer a reasonable expectation that India's growth would outperform that of its peers over the medium term. Further improvements in its macroeconomic and institutional profile would be achieved. However, the reform efforts to date has not yet achieved the conditions that would support an upgrade, particularly in accelerating private investment to support high, stable growth, without which the government's debt burden - a key constraint on the rating - is likely to remain high for a sustained period, it said.
Moody's assigned a positive outlook to India's lowest investment grade in April 2015.
Having assessed progress made since then, Moody's conclusion was that important steps have been taken to strengthen India's institutions. However, the policy efforts have not delivered a sufficiently clear prospect of the reform dividends - sustained, high growth and the promise of a reduction in the country's debt burden - to support an upgrade, the statement said.
Finance Minister Arun Jaitley had last week questioned the global agencies' reluctance to recognise the government's reform measures.
"I must acknowledge and state that the kind of steps we have taken … we still have not got from international agencies the full recognition of the effort we have put in," he had said at the Economic Editors' Conference.
