Moody Gives Green Light to Indian Rating, but With Reforms

Moody’s Investors Service gave the green light to Indian macroeconomics policies and believes that India’s  rating will continue to grow despite crashing economies with reform implications.

Moody’s has discussed many of the free market reforms and the ability to control the inflation rate in India. Moody’s believe that if the inflation rate is further controlled or even the current improvement is sustained along with implementation of new reforms, then the country would see positivity in global credit ratings.

On Moody’s rating chart, India holds ‘Baa3’ rating. On Moody’s Investors Service chart, Baa3 rating refers to positivity in bonds and investments with relatively low risk. However, Baa3 is just one level higher than Junk Bond Rating. On real notes, Baa3 rating is generally viewed as a slightly risked investment. Most bond investors invest in Baa3 only after critical risk assessment. But with India, Moody’s Baa3 rating is ranked along with Positive Outlook; a sign of possibility of growth in controlled circumstances.

The report on the Indian Government further revealed that if the company sees a reflection of positivity in Indian Government’s macroeconomics policies along with sustained or improved inflation control then the rating on Moody’s chart will be improved.

The report continues that the research center has applied a positive outlook rating on the basis of expecting the government to implement devised macroeconomic policies which will bring about an improvement to to India’s sovereign credit rating. It will also lower the credit risk by improving the regulatory environment, stabilizing inflation, providing more resources to micro-businesses and establishing an infrastructure of investment. Fiscal ratios will also improve with economic reformations.

While reflecting the positive and hopeful side of the Indian economy, Moody’s also indicated the possible drawbacks and a drop in India’s rating in the case of counter-policy establishment. Moody’s clearly indicated in the report that a slowdown or breakdown of reforms or reversal at worst can put the credit outlook back to negative.

As there are positive contributors to the Indian economy, there are negative contributors as well like the weakening banking system metrics. Another strong contributor which may negatively affect the Indian rating is decline in reserves of foreign exchange which cover the external debts and imports.

Referring to the changing economic climate and improvement in fuel and metal prices, the report says that lowered oil prices have played a key role in stabilizing the macroeconomics infrastructure in India. It also states that tighter fiscal policies and improved transparency in monetary policies have also contributed to improve Indian macroeconomics.

India’s role as a commodity importer is a strong reflector of Indian GDP outlook. The report says that low commodity prices have benefitted India in various positive ways. New Indian policies also reflect the nation’s reliance on domestic economics for improving GDP. The technique has been used by various other countries like China to improve GDP and its continuity will lead to an improved India credit rating.

Moody’s Investors Service, under the parent company Moody’s Corporation provides credit ratings and research regarding securities, debt instruments and global economies and is renowned for its corporate social responsibilities and accurate analysis reports.