Industry experts'view on Moody's rating upgrade
Rating agency Moody’s upgraded sovereign credit rating for India to Baa2 from Baa3, indicating a healthy economic situation. Moody's has also upgraded India's local currency senior unsecured rating to Baa2 from Baa3 and its short-term local currency rating to P-2 from P-3. Below are some quotes from the industry experts stating their view on the rating upgrade.
“The long overdue sovereign rating upgrade for India is an endorsement of institutional and structural transformations ushered in by the Government in the last few years while maintaining fiscal prudence. This was earlier vindicated by the sharp jump in India's Ease of Doing Business ranking. Such global ratifications will lower the cost of borrowing and boost investor confidence and conviction in the economy.” Rana Kapoor, MD and CEO, YES BANK.
“Moody’s upgrade of sovereign credit rating for India to Baa2 from Baa3 is a clear indication that the economy is on the right track. The upward revision — coming so soon after the improvement in Ease of Doing Business rank — is a welcome endorsement of the government's recent macro-economic and institutional reforms such as demonetisation, implementation of GST, recapitalisation of public sector banks, the insolvency and bankruptcy code, and the Aadhaar-linked Direct Benefit Transfer system. Going forward, it will boost economic growth, attract foreign fund flows and put India back on a faster growth path.” Mr. Vishwavir Ahuja, MD & CEO, RBL Bank.
“Government’s ability to raise resources has improved substantially over the last few years due to fundamental reforms undertaken including demonetization, GST, jan dhan accounts, mobile trinity, etc. It has increased number of direct tax payers, which is revenue attractive. It has also increased the ability of state and central governments to collect taxes better using GST, reducing leakages.
Introduction of Jan dhan accounts, Aadhaar, mobile trinity reduces the wastage in public spend which was perennial in earlier implementation. Ease of doing business would also add to the tax collections. Government’s ability to service debts increases and also budget deficit comes down substantially.
Overall Tax-GDP ratio is expected to increase substantially over next few years and hence the upgrade by Moody’s which is expected to be followed by other rating agencies.” Mr. Ashishkumar Chauhan, MD & CEO, BSE
“The Moody's upgrade supports our call that risks in India's G-sec markets are overdone. We still expect policy steps to cool the risks to enable banks to cut lending rates. The RBI should cut rates on December 6 to signal a lending rate cut before the busy season with inflation well under control. We also expect it to reverse OMO sales by Rs500bn by March 2018 to provide sufficient liquidity. Finally, the Moody's upgrade also supports our long standing view that India will continue to open up its bond market to foreign investors to fund investment.” Mr. Indranil Sen Gupta, Economist and Co-head of India Research, Bank of America Merrill Lynch (BofAML).
“The long overdue sovereign rating upgrade for India is an endorsement of institutional and structural transformations ushered in by the Government in the last few years while maintaining fiscal prudence. This was earlier vindicated by the sharp jump in India's Ease of Doing Business ranking. Such global ratifications will lower the cost of borrowing and boost investor confidence and conviction in the economy.” Rana Kapoor, MD and CEO, YES BANK.
“Moody’s upgrade of sovereign credit rating for India to Baa2 from Baa3 is a clear indication that the economy is on the right track. The upward revision — coming so soon after the improvement in Ease of Doing Business rank — is a welcome endorsement of the government's recent macro-economic and institutional reforms such as demonetisation, implementation of GST, recapitalisation of public sector banks, the insolvency and bankruptcy code, and the Aadhaar-linked Direct Benefit Transfer system. Going forward, it will boost economic growth, attract foreign fund flows and put India back on a faster growth path.” Mr. Vishwavir Ahuja, MD & CEO, RBL Bank.
“Government’s ability to raise resources has improved substantially over the last few years due to fundamental reforms undertaken including demonetization, GST, jan dhan accounts, mobile trinity, etc. It has increased number of direct tax payers, which is revenue attractive. It has also increased the ability of state and central governments to collect taxes better using GST, reducing leakages.
Introduction of Jan dhan accounts, Aadhaar, mobile trinity reduces the wastage in public spend which was perennial in earlier implementation. Ease of doing business would also add to the tax collections. Government’s ability to service debts increases and also budget deficit comes down substantially.
Overall Tax-GDP ratio is expected to increase substantially over next few years and hence the upgrade by Moody’s which is expected to be followed by other rating agencies.” Mr. Ashishkumar Chauhan, MD & CEO, BSE
“The Moody's upgrade supports our call that risks in India's G-sec markets are overdone. We still expect policy steps to cool the risks to enable banks to cut lending rates. The RBI should cut rates on December 6 to signal a lending rate cut before the busy season with inflation well under control. We also expect it to reverse OMO sales by Rs500bn by March 2018 to provide sufficient liquidity. Finally, the Moody's upgrade also supports our long standing view that India will continue to open up its bond market to foreign investors to fund investment.” Mr. Indranil Sen Gupta, Economist and Co-head of India Research, Bank of America Merrill Lynch (BofAML).
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