Faster fiscal consolidation key for India rating
New Delhi, May 19
Moody’s Investors Service could consider upgrading India’s sovereign rating if the government’s planned fiscal consolidation is faster than expected, Marie Diron, a senior vice president at its Sovereign Risk Group told Reuters.
However, if the government slows its fiscal consolidation plans or falters on its reform implementation, the ratings agency would stabilise the rating at the current ‘Baa3’, Diron today.
“What would potentially trigger an upgrade would be a faster progress in fiscal consolidation than we are currently expecting,” Diron said in a telephone interview from Singapore.
The ‘Baa3’ rating, lowest investment grade rating, has a ‘positive’ outlook.
In the recent federal budget, Finance Minister Arun Jaitley stuck to an ambitious pledge of reducing the fiscal deficit to 3.5 per cent of gross domestic product from 3.9 per cent, and improved tax collection could help meet that target.
Diron said India had experienced ‘some progress’ towards reforms in infrastructure, foreign direct investment and unveiling a bankruptcy law, but said it had not seen ‘broad scale reforms’ such as a revamped goods and services tax or new regulations for land acquisition.
“We expect that reform progress to be bumpy and to come with sparks of progress and then maybe some periods of more slowness. But as long as the direction continues and gradually, we should see some positive effects on the economy,” she said.