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FinMin pitches for rating upgrade
Armed with budget proposals to bring down the fiscal deficit, the Finance Ministry plans to engage in dialogue with global ratings in order to upgrade sovereign rating.
To meet Standard & Poor’s, other global rating agencies
New Delhi: Armed with budget proposals to bring down the fiscal deficit, the Finance Ministry plans to engage in dialogue with global ratings in order to upgrade sovereign rating. It proposes to hold series of meetings with the global agencies in the next 2-3 months.
"Representatives from Standard & Poor's (S&P) and The Japan Credit Rating Agency (JCRA) are scheduled to meet finance ministry officials on August 12 and August 28. While the representatives of rating agencies Fitch and Moody will come probably in September-October. We will pitch for a rating upgrade," a senior finance ministry official said.
The official said the finance ministry will impress upon the rating agencies the resolve of the government to contain fiscal deficit at 4.1 per cent this year and lower it to 3 per cent by 2016-17.
In order to promote growth and investment, Finance Minister Arun Jaitley in his budget 2014-15 has included measures to support faster economic growth, such as allowing greater FDI in insurance and defence, increasing spending on infrastructure, and introducing tax incentives for savings and investment. S&P currently rates India as 'BBB-', the lowest in the investment grade, with a negative outlook.
Any further downgrade will push India's rating to the junk status, making it difficult and costlier for Indian entities to borrow funds overseas. Moody's assigns a 'Baa3' rating on India, with a stable outlook. FItch has affirmed India's long-term foreign and local currency issuer default rating (IDR) at 'BBB-' with stable outlook, indicating low default risk.
Sovereign rating to remain stable, says Morgan Stanley
Mumbai: India's Sovereign credit rating is expected to remain stable over the next 12-month period, brokerage firm Morgan Stanley said in its research report.
India's sovereign is currently rated BBB(-) by all rating agencies; only S&P has India on a negative outlook. While the rating agencies do not detail specific triggers for a downgrade, S&P is looking for stronger growth, fiscal account consolidation and lower inflation to revise the outlook to stable. While India scores well for variables, such as GDP growth and FX reserves/GDP on Morgan Stanley forecast, it needs to show considerable improvement in inflation, fiscal balance and current account deficit to potentially be upgraded. Morgan Stanley expects inflation rate to be reduced to 6.5 per cent over the next 12 months, it still compares unfavourably with the average BBB-rated EM sovereign (4.8 per cent), and average EM sovereign rated A and above (2.6 per cent). Similarly, India's fiscal balance expectation (-6.4 per cent of GDP) compares unfavourably with EM sovereigns rated BBB (-1.9 per cent of GDP) and A (-2.1 per cent of GDP).
A pick-up in economic growth and rising private capital needs will be important drivers for Indian credit markets. The factors like reforms to target reducing inflation, cutting the fiscal deficit, and encouraging FDI inflows to boost productivity and improving growth, is critical for achieving the government's aim of sustainable and higher growth, the report said.
