Moody’s upgrade reflects government reforms like GST and IBC: Arvind Subramanian

Global rating agency Moody’s on Friday upgraded India’s sovereign bond ratings to Baa2 from Baa3.

Global rating agency Moody’s on Friday upgraded India’s sovereign bond ratings to Baa2 from Baa3. Baa2 is the ninth highest rating in Moody’s long-term corporate obligation rating, which is subject to moderate credit risk.

The upgarde comes as a big positive for the Modi government as the rating agency said improved growth prospects driven by economic and institutional reforms led to the upgrade.

Chief Economic Advisor Arvind Subramanian told CNBC-TV18 said the upgrade has been long overdue and that it reflects structural reforms — like Goods and Services Tax (GST), bank recapitalisation, Insolvency and Bankruptcy Code (IBC), monetary policy committee — that have been implemented.

So far, the rating agencies did not recognise the country’s macroeconomic strength. The government, he added, has raised this point in the economic survey many times that the relative ratings of India and China did not reflect the underlying macroeconomic realities.

On whether this upgarde will fastrack India’s growth,  Subramanian said: “We (government) have an agenda, we have objectives that we have to meet and that will continue the reform programme and the macrostability, objectives will continue and this is welcome, but we are going to be driven a lot by what we have to do internally.”

Piyush Goyal, Minister of Railways and Coal too tweeted on the upgarde.

Sanjeev Sanyal, Principal Economic Advisor echoed CEA’s views and said that rating upgrade to Baa2 is a good news and a recognition of the long series of reform measures that have been done under PM Modi.

Most of these measures are well known to global investors and an endorsement by the rating agency, a step forward and the government will continue to work, move forward with other measures, said Sanyal.

Moody’s upgrade is an acknowledgement of systemic reforms undertaken by the government,  former Finance Secretary, Ashok Lavasa said.

The rating upgrade  will allow the country’s corporates capacity to raise money from the market, help improves the overall perception of the country and the risk associated with investment in India, said Lavasa.

He further said that global perception is changing about the country.

Dr Hasmukh Adhia, Revenue Secretary, Ministry of Finance, Government of India tweeted “The path that Government has chosen for long term reforms and fiscal consolidation is well recognised by investors already. The rating agency too has now confirmed it formally, which is welcome.

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