Moody's adds to positive mood on Indian economy, says decisive Lok Sabha election result 'credit positive'

Written by Reuters | Mumbai | Updated: May 19 2014, 21:07pm hrs
Indian economyStandard & Poor's rates Indian economy at the lowest investment grade, but with a "negative" outlook. (Reuters)
The opposition Narendra Modi-led Bharatiya Janata Party's resounding Lok Sabha election win is credit positive for the Indian economy as it boosts the prospect that a stable government will address the country's challenges, Moody's Investor Service said on Monday.

Moody's rates India "Baa3", the lowest investment-grade rating with a "stable" outlook.

"The completion of the election will allow stalled policies relating to the corporate and infrastructure sectors to resume, a credit positive for the country's corporates," said Vikas Halan, vice president and senior credit officer at Moody's, said in a statement.

Rival rating agency Standard & Poor's also rates India at the lowest investment grade, but with a "negative" outlook.

Investors are increasingly betting on a turnaround in the Indian economy after the Narendra Modi-led BJP and its allies won a more decisive-than-expected 334 seats in India's 543-member lower house in vote counting on Friday.

"Closer co-ordination between the central and state governments on clearances for mega projects and land use, two proposals outlined in the BJP's manifesto, would address investment delays," Halan wrote.

India's economy is growing at less than 5 percent, its slowest in a decade.

Decisive election result credit positive for India: Moody's

(PTI) The landslide victory of BJP-led NDA in the elections is credit positive for India as a stable central government is expected to address the country's economic challenges, a Moody's report today.

"Moody's believes that the new government's strong mandate increases the possibility of a stable central government that will pursue a shared economic agenda to address India's macroeconomic challenges," said the report -- 'India's decisive election outcome is credit positive'.

Moody's assigns a 'Baa3' rating to India, signifying moderate credit risk, with a stable outlook.

In the recently concluded elections, the BJP-led NDA scored an overwhelming majority of 334 seats, in the 543-member Lok Sabha.

The landslide victory is credit positive for both India's sovereign profile and corporate sector, while the effects for its banks are currently limited, it said.

The credit profiles of public-sector banks, however, may experience positive effects from 2015, Moody's Investors Service added.

It said the election results will have the immediate effect of sustaining investor sentiment, which has also recently boosted India's equity indices and the rupee.

The BSE 30-share index, Sensex, has gained more than 18 per cent in the past three months on expectations that the BJP would win a considerable majority and pursue policies conducive to investment and economic growth.

"Moody's also considers that the completion of the election will allow stalled policies relating to the corporate and infrastructure sectors to resume, a credit positive for the country's corporates," Moody's VP and Senior Credit Officer Vikas Halan said.

He said a closer co-ordination between the central and state governments on clearances for mega projects and land use, two proposals outlined in the BJP's manifesto, would address investment delays.

The agency said it also expects that the new government will increase natural gas prices, which would benefit upstream oil and gas companies and provide greater long term incentives for investment.

Gas prices were originally scheduled to almost double in April, but the previous government put that increase on hold because of the elections.

Moody's said there is a chance that the new government will infuse a higher amount of capital this year than what had been allocated in the interim budget, which would be a credit positive for public-sector banks.