A Moody’s Investors Service analyst said India needed to improve its fiscal position to earn a ratings upgrade and warned that even if policy action was taken now it would likely take a while for the impact to be reflected on government finances.
India’s fiscal consolidation would also need to be an improvement on similarly-rated countries, Moody’s sovereign rating analyst Atsi Sheth told Reuters on Thursday.
“For a rating upgrade, the fiscal position has to improve materially or there should be evidence that it’s going to improve materially not only with respect to itself, but comparable to similarly-rated countries,” she told Reuters in a phone interview.
“And that is still some distance away even if policy action is taken now because there is a long road to climb back up.”
Sheth added the government’s moves to improve the fiscal position would have a bigger impact on India’s credit than any policy action by the central bank.
The Reserve Bank of India on Thursday unexpectedly cut its policy repo rate by 25 basis points to 7.75 per cent. Moody’s currently rates India at “Baa3”, the lowest investment-grade rating, with a “stable” outlook.