Rating upgrade denied again! Will Fitch ever follow Moody’s? Here’s what India needs to do

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Published: April 30, 2018 7:12:32 PM

Fitch Ratings once again denied India a sovereign rating upgrade for the 12th time citing country's credit profile which was at 'Achilles' heel'. What will it take for India to get an upgrade from Fitch?

Rating upgrade denied again! Will Fitch ever follow Moody's? Here's what India needs to doFitch Ratings once again denied India a sovereign rating upgrade for the 12th time. (Image: Reuters)

Fitch Ratings once again denied India a sovereign rating upgrade for the 12th time citing country’s credit profile which was at ‘Achilles’ heel’. The denial comes as a setback for the Narendra Modi government, which, buoyed by Moody’s surprise upgrade last November, had hopes of an upgrade on the back of “structural and fundamental reforms” such as the Goods and Services Tax (GST) and Insolvency and Bankruptcy Code (IBC).

But like “conservative” S&P, Fitch denied rating upgrade again even as it praised structural reforms, leaving room for the question: What will it take for India to get an upgrade from Fitch? The answer is an improvement in two fundamental macroeconomic factors.

Fitch said that a reduction in general government debt over the medium term to a level closer to that of rated peers, and a higher sustained investment and growth rates without the creation of macro imbalances, such as from successful structural reform implementation could trigger a positive rating.

What’s common between all three rating agencies is that they all have praised India’s robust growth and structural changes; albeit S&P and Fitch took a conservative approach, Moody’s, anticipating the long-term benefits of reforms, gave a nice surprise upgrade last year, although, after 14 years.

S&P had said, affirming BBB- rating, that if the government’s reforms markedly improve its net general government fiscal out-turns and reduce the level of net general government debt, and if  India’s external accounts strengthen significantly, it would make a case for India’s upgrade.

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