NEW DELHI: Questioning Moody’s Finance Ministry’s methodology on Thursday, the global agency said it had ignored reforms initiated by the government and should not wait “till infinity” for them to take root before upgrading the country’s sovereign rating.
“Our concern was mainly about the methodology of the whole process… Of course, the rating agencies are free to arrive at their conclusion…,” economic affairs secretary Shaktikanta Das said. “I thought the due process has to be followed, and you cannot jump the gun,” he said, alluding to Moody’s making certain public comments a day before meeting the Finance Ministry.
Calling the reform process slow and gradual with muted private investment and bad loans posing a challenge, Moody’s said it could upgrade India’s rating in 1-2 years if it is convinced that reforms are “tangible.”
India’s sovereign rating by Moody’s stands at ‘Baa3’, the lowest investment grade — just a notch above ‘junk’ status.
Das added: “We found the methodology to be deficient. That is something we pointed out. So, we expressed our serious concerns about the methodology that they are following. Then, there were other issues. We explained the reforms, gathering roots and developing sufficient depth.”
During the Finance Ministry meeting on Wednesday, representatives from Moody’s are reported to have said that a rating upgrade could become a reality when the benefits of reforms are felt on the ground, and the country’s banking sector stabilizes.
READ ALSO :
- India still has impediments to FDI in some retail and finance areas, rues USTR
- How a Blogger Started His ETF
- German ministry wants African migrants intercepted – report
- India overtakes the US to become second largest internet market in the world: Broadband Commission
- Ujjivan Financial Services to use biometric ATMs
Das said: “The depth of the reforms in India cannot be doubted. It has been a unidirectional process for the last several years, especially in the last two years. The pace of reforms and the pace at which the government undertakes reforms due to weight have to be given. “You cannot say that I will give zero weight, and I will wait until infinity to see these reforms take root…I don’t think…it should not be a kind of bottomless pit.”
In April last year, Moody’s had changed India’s rating outlook to ‘positive’ from ‘stable’, citing reform momentum, and said it could consider India for an upgrade in the next 12-18 months.
During the meeting, the ministry also impressed the global rating agency with the government’s resolve to contain the fiscal deficit at 3.5 percent of GDP in the current fiscal year.
