Moody's rating goes against people's mood: Sibal

Ever since the government came to power in 2014 experts pointed out that the lower crude oil prices over the last few years had helped the government to significantly improve India’s macro economic indicators

Stock, bond and rupee markets gave a thumbs up to the rating upgrade with the Sensex and Nifty ending with more than 0.5% gains.

Moody's Investors Service, on Thursday, raised India's sovereign credit rating by a notch, from "Baa3" to "Baa2", and also revised upwards its outlook for the country from "positive" to "stable".

Finance Minister Arun Jaitley told reporters Moody's decision was a "belated recognition" of the steps the government has taken to fix India's $2 trillion economy.

Meanwhile, Congress communications in-charge Randeep Surjewala sought to downplay the rating upgrade, saying the same agency had miscalculated USA subprime mortgages before the economic meltdown.

The rating agency highlighted a number of genuine positive recent developments in India as justifications for a ratings upgrade - though its inclusion of demonetization among them should raise some eyebrows, Shilan Shah, an economist at Capital Economics, said. HPCL said the firm would benefit from both lower borrowing costs and a stronger rupee.

"Recognising India's continued progress under Hon'ble Narendra Modi ji Mo'dy's Investors Service has upgraded India's sovereign rating for the first time since 2004, citing the nat'on's economic and institutional reforms", tweeted Minister of State for Civil Aviation Jayant Sinha. "In fact, always the question was why the rating upgrade wasn't happening", said Mr Kumar.

"The reform program will thus complement the existing shock-absorbance capacity provided by India's strong growth potential and improving global competitiveness", it said. "Contrast the mood at Moody's with the mood of the people".

India's economic growth had slipped to an over three-year low of 5.7 per cent in the first quarter. It had in 2015 changed rating outlook to "positive" from "stable". HDFC Chairman Deepak Parekh said, "I've always felt India's rating was far below than what it should be".

"Other important measures which have yet to reach fruition include planned land and labour market reforms which rely to a great extent on cooperation with and between the states", it said.

"Markets should worry that the government now having received the ratings upgrade, may actually slacken and relax its commitment to reducing fiscal deficit, as per the stated plan - especially, at a time when investors seem to be worrying about the same as reflected in the increase in bond yields of more than 50 bps since August 2017,"said Mr Chari". "We should celebrate Moody's upgrade by holding a midnight ceremony in Central Hall of Parliament and damn Standard and Poor".

These measures increase the degree of formality in the economy, broaden the tax base (as with the GST), and promote expenditure efficiency through rationalisation of government schemes and better-targeted delivery (as with the DBT system) will support the expected, though very gradual, improvement in India's fiscal metrics over time, it said.

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