Moody's Raises Rating First Time 14 Years

Moody's Raises Rating First Time 14 Years

Moody´s Investors Service on Friday upgraded India´s sovereign bond rating byanotch for the first time in 14 years, showing confidence in the Narendra Modi government´s reform initiatives such as demonetisation, the goods and services tax (GST) and its efforts to resolve the bad debt asset crisis of banks.Moody´s raised the rating from the lowest investment grade of Baa3 to Baa2, and changed the outlook from positive to stable.

“It is a be lated recognition of the positive steps taken in the past few years.Many who had doubts about India´s reform process would now seriously introspect on their position,” Finance Minister Arun Jaitley said in response.Analysts said the upgrade would lead to higher capital inflows, strengthening the rupee, and ease India Inc´s access to overseas capital at lower rates.

The markets cheered the move.The Sensex rose 235.98 points to close at 33,342.80, even after paring initial gains.The Nifty crossed the 10,300 mark but ended at 10,283.60, up 68.85 points.In its biggest singleday surge in six weeks, the rupee gained 31 paise to end at a one week high of 65.01 against the dollar.

The 10 year bond yield, which fell 12 basis points on Friday, ended just 1 basis point lower.Moody´s, however, warned the rating could be downgraded “if the health of the banking system deteriorated significantly or external vulnerability increased sharply”.

“While a number of reforms remain at the design phase, Moody´s believes that those implemented to date will advance the government´s objective of improving business climate, enhancing productivity, stimulating investment, and ultimately fostering strong and sustainable growth,” it added.

Friday´s upgrade comes six months after Moody´s cut China´s sovereign rating byanotch. Even then, China´s rating is four notches higher than India´s.India is now behind only China in the BRICS bloc.

The upgrade also comes just weeks after India improved its ranking by 30 places to 100th for the first time in the World Bank´s ease of doing business report.Other global rating agencies were, however, more cautious in heir out look.

Standardand Poor´s, which still assigns the lowest investment grade to India with a stable outlook, said India needed to address its weak fiscal position, indicating upgrades would take time.India´s economic growth had slipped to an over three year low of 5.7 per cent in the first quarter.The second quarter´s numbers would be out by the end of this month.

Upgrade lifts...

Moody´s pegged GDP growth at 6.7 per cent in FY18 and 7.5 per cent in FY19, with similarly robust levels of growth from FY20."Longer term, India´s growth potential is significantly higher than most other Baarated sovereigns," it said.The government had been trying to convince the agencies to upgrade ratings but did not get much positive response —except when Moody´s raised the outlook on the lowest investment grade to positive in 2015.

Moody´s also upgraded ratings foraslew of public sector companies —State Bank of India, Export Import Bank of India and Indian Railways Finance Corporation —and the private sector lender HDFC Bank on Friday.Rajnish Kumar, the chairman of the country´s largest lender State Bank of India, said that overtime, this would reduce the borrowing costs of the government and financial institutions and result in increased investor confidence in India´s growth and reform story

HDFC Chairman Deepak Parekh said, "I´ve always felt India´s rating was far below than what it should be.Maybe, the bank recap move convinced them that India is on the reform path and we mean business." The out look on new rating is stable —this means that factors that can lead to a downgrade of India´s rating and the ones that can upgrade its score a reevenly balanced.Earlier, the outlook was positive but on a lower rating, which indicated there were more chances of an upgrade than downgrade.

The Business Standard, New Delhi, 18th November 2017

Household debt up, but India still lags emerging-market economies: RBI

Although household debt in India is rising, driven by increased borrowing from the financial sector, it remains lower than in other emerging-market economies (EMEs), the Reserve Bank of India (RBI) said in its Financial Stability Report. It added that non-housing retail loans, largely taken for consumption, accounted for 55 per cent of total household debt.As of December 2024, India’s household debt-to-gross domestic product ratio stood at 41.9 per cent. “...Non-housing retail loans, which are mostly used for consumption purposes, formed 54.9 per cent of total household debt as of March 2025 and 25.7 per cent of disposable income as of March 2024. Moreover, the share of these loans has been growing consistently over the years, and their growth has outpaced that of both housing loans and agriculture and business loans,” the RBI said in its report.Housing loans, by contrast, made up 29 per cent of household debt, and their growth has remained steady. However, disaggregated data sho...

External spillovers likely to hit India's financial system: RBI report

While India’s growth remains insulated from global headwinds mainly due to buoyant domestic demand, the domestic financial system could, however, be impacted by external spillovers, the Reserve Bank of India (RBI) said in its half yearly Financial Stability Report published on Monday.Furthermore, the rising global trade disputes and intensifying geopolitical hostilities could negatively impact the domestic growth outlook and reduce the demand for bank credit, which has decelerated sharply. “Moreover, it could also lead to increased risk aversion among investors and further corrections in domestic equity markets, which despite the recent correction, remain at the high end of their historical range,” the report said.It noted that there is some build-up of stress, primarily in financial markets, on account of global spillovers, which is reflected in the marginal rise in the financial system stress indicator, an indicator of the stress level in the financial system, compared to its p...

Retail inflation cools to a six-year low of 2.82% in May on moderating food prices

New Delhi: Retail inflation in India cooled to its lowest level in over six years in May, helped by a sharp moderation in food prices, according to provisional government data released Thursday.Consumer Price Index (CPI)-based inflation eased to 2.82% year-on-year, down from 3.16% in April and 4.8% in May last year, data from the Ministry of Statistics and Programme Implementation (MoSPI) showed. This marks the fourth consecutive month of sub-4% inflation, the longest such streak in at least five years.The data comes just days after the Reserve Bank of India’s (RBI) Monetary Policy Committee cut the repo rate by 50 basis points to 5.5%, its third straight cut and a cumulative reduction of 100 basis points since the easing cycle began in February. The move signals a possible pivot from inflation control to supporting growth.Food inflation came in at just 0.99% in May, down from 1.78% in April and a sharp decline from 8.69% a year ago.A Mint poll of 15 economists had projected CPI ...

CA Online

Search This Blog