Moody’s Investors Service on Tuesday said a review of India’s sovereign rating – which determines its appeal to investors and eligibility for credit – will take at least another one or two years, The Hindu Business Line reported. The agency said it needs “more evidence” of fiscal consolidation and “tangible reforms” before it undertakes such a review. India currently holds a rating of Baa3 (the lowest investment grade), with a positive outlook.
Reforms already implemented by the Centre will help boost investor confidence in India, Moody’s Sovereign Group senior vice president Marie Diron said, according to PTI. In particular, Diron called the Reserve Bank of India’s objective to contain inflation a “credit positive” for the country. “The credit implications of India’s reforms will materialise the medium term,” she said.
However, the agency added that factors such as private investment and risks in the banking sector will remain an issue for India’s sovereign rating. Diron said that while the recognition of bad assets in India’s banks was a “first step, the measure does not strengthen the resilience of banks”, Mint reported. She further noted that there was also a need for more reforms in areas such as land and labour.
The remarks come a day ahead of a meeting between the Moody’s and representatives from the Finance Ministry including Economic Affairs Secretary Shaktikanta Das. On Monday, the group issued a “stable” outlook for the country’s banking sector for the next 12 to 18 months, saying it was moving beyond the worst of its bad loans phase.
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