International rating agency Moodys has said expectation that after winning the trust vote the UPA government will initiate key reforms may not come true as uncertainties pertaining to reforms persist, given the prevailing pressures and policy differences among its coalition members.
?Any major reforms in sectors such as banking, insurance and pension before elections are unlikely as the government has to address a number of challenges like high inflation and policy differences amongst coalition partners,? said Moodys India representative Chetan Modi. Though any big reforms are unlikely in the pre-election period, the government surviving the trust vote even after the Lefts withdrawal of support might give it the freedom to proceed with certain reforms, he said.
?They had put some reforms on hold because of the Lefts opposition. They might bring certain reforms now,? Modi said. ?We are constantly assessing the domestic situation and have already incorporated the coalition structure of Indian government. (Hence) the recent development in the political scene doesnt add any particular impact on our ratings,? he said. Inflation, now at 11.91%, is unlikely to decline in the near future as it was largely correlated to the global crude oil prices and local monsoon, Modi said. ?It is unlikely to cool down in the near-term. It looks like a good monsoon which will have an impact on inflation in the short-term while in the longer term, crude oil prices will play a major role,? Modi said. Asked to comment on Fitchs negative outlook on the domestic currency of the country, Modi said that Moodys outlook is stable.
On GDP growth projections, Modi said ,?We see it just below 8% during the current fiscal, though it may touch the 8% mark in the long term.?
However, Subrata Ray, head of corporate sector ratings, Icra, where Moodys holds a stake, said the agency has not seen any decline in the investment proposals and profitability of Indian corporates owing to a higher interest rate-regime in the recent past.
?I do not see any major impact on corporate profitability because of higher interest rates. (But) they have become more cautious,? Ray said. Moodys has currently given BAA3 investment rating on Indias forex exposure and BA2 rating on domestic debt.