US-based agency Moody’s on Friday upgraded India’s sovereign credit rating by a notch to ‘Baa2’ with stable outlook after a gap of 13 years, saying reforms will foster sustainable growth.
Sovereign rating is issued to national governments and a barometer of the country’s investment climate, reported PTI. It gives investors insight into the level of risks, including political, associated with investing in a particular country.
According to Moody’s, Baa rating is medium-grade and subject to moderate credit risk while the modifier 2 indicates a mid-range ranking.
This is after the Centre’s Narendra Modi government pitched hard for a rating upgrade citing the country’s strong economic fundamentals, political stability and a slew of reforms.
In his defence the Modi government cited sme of the key reforms initiated by it inclusing the Goods and Services Tax (GST), demonetisation, Aadhaar, bank recapitalisation, the Insolvency and Bankruptcy Code and targeted delivery of benefits through the Direct Benefit Transfer (DBT) system.
As expected, an elated Indian finance minister, Arun Jaitley, called this an endorsement of reforms.
He said, “For three years in a row, India is the fastest growing economy among all major economies.” Jaitley added that steps including demonetisation were taking India into a digitised economy.
Moody’s questionable past
While the BJP is upbeat about the Moody’s forecast as the timing for the party couldn’t have been any better given the saffron party faces an uphill task in facing the growing anti-incumbency in Gujarat, which goes to polls next month.
Moody’s, however, has had quite a questionable past as the US federal court had indicted the agency for manipulative practices just before the global economic recession of 2008. It had admitted to issue false predictions just before 2008 economic depression.
Faced with the government lawsuit, the Moody’s had to pay nearly $864m to settle with US federal and state authorities over its ratings of risky mortgage securities in the run-up to the 2008 financial crisis.
One lawsuit had claimed that Moody’s ratings were influenced by its desire for fees, despite claims of independence and objectivity. It also accused Moody’s of knowingly inflating ratings on toxic mortgage securities.
Connecticut attorney general, George Jepsen, had said that Moody’s ratings were “directly influenced by the demands of the powerful investment banking clients who issued the securities and paid Moody’s to rate them.”
Moody’s, according to a report by London’s Guardian, had reached the deal with the justice department, 21 states and the District of Columbia, resolving allegations that the firm contributed to the worst financial crisis since the Great Depression, the department said in a statement.
In June this year, the European Union’s markets watchdog had fined Moody’s 1.24 million Euros for failing to explain publicly how it made a series of ratings decisions about the financial health of global institutions.
Moody’s upgrading India’s economic outlook despite the Indian economy going through its worst slowdown in three years comes just a day after another American agency astonishingly concluded that 90% Indians were in love with Prime Minister Modi.
The US-based agency had based its assertion by reportedly speaking to just 2264 people in a country of 1.25 billion people. Many commentators had called Pew’s ‘findings’ as ‘con job.’ Pew Research’s claims were later debunked by Janta Ka Reporter’s editor-in-chief, Rifat Jawaid.
Gujarat goes to polls in two stages on 9 and 14 December with a resurgent Congress posing serious challenge to BJP’s future both in the western Indian state and elsewhere in the country.