Govt rebuts Moody’s action, sees ‘strong political will’ for reforms

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Updated: November 9, 2019 9:04:52 AM

The official added that Moody’s assessment was out of sync with reality and that it should have evaluated India’s recent growth slowdown in the broader context of a global deceleration.

Moodys rating of india, Indian economy, global rating agency, FDI, India economic growthThe official added that Moody’s assessment was out of sync with reality and that it should have evaluated India’s recent growth slowdown in the broader context of a global deceleration.

The government on Friday differed with Moody’s assessment of the Indian economy, asserting that the country’s relative standing remains unaffected and that it’s still one of the world’s fastest-growing major economies. Reacting to the global rating agency’s downward revision of its rating outlook on the government to “negative” from “stable”, the finance ministry said: “The fundamentals of the economy remain quite robust with inflation under check and bond yields low. India continues to offer strong prospects of growth in near and medium term.”

Separately, commenting on Moody’s seeming scepticism about the government’s ability to usher in further reforms, a senior finance ministry official said the centre had recently cut the corporate tax rate sharply, despite the Opposition’s jibe of “suit-boot ki sarkar”. “This suggests strong political will to push through bold reforms,” he said, adding that the impressive 27% jump in FDI in the June quarter was a testament to the attractiveness of the country as an investment destination. Moody’s change in outlook for India, he stressed, was unlikely to have any impact on the country’s ability to woo foreign investments, nor would it have much of an adverse effect on the cost of borrowing for Indian companies in the overseas market.

The official added that Moody’s assessment was out of sync with reality and that it should have evaluated India’s recent growth slowdown in the broader context of a global deceleration.

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He questioned Moody’s methodology and stressed that even when Moody’s had upgraded India’s sovereign rating in 2017 by a notch to the lowest investment grade of Baa2, the government was clear that it was only a “belated recognition” of the long practice of assigning unfair ratings to India by global agencies. Although the IMF has trimmed its India growth forecast to 6.1% for 2019-20, the lowest in five years, it has also revised down 2019 global growth to just 3%, the lowest since the sub-prime crisis a decade ago.

Government officials have, in the past, repeatedly pointed at “lack of logic” in methodologies adopted by agencies and the strong degree of discretion they use while viewing countries with similar standing, and their history of failures to predict crises, including the sub-prime one.

In the statement, the finance ministry said the IMF had estimated India’s economic growth at 6.1% in 2019, which would pick up to 7 % in 2020. “As India’s potential growth rate remains unchanged, assessment by IMF and other multilateral organisations continue to underline a positive outlook on India,” it said.

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