After Finance Minister and RBI governor’s assurance of Indian economy being strong enough to withstand the global turmoil, the international rating agency Moody’s Investor's Service too has said that India's macro-economic indicators have improved over the last few years, which will help the country withstand volatility in global capital flows in coming months.
Moody's in its latest report has said that recent policy measures by the government will stabilize inflation and help India grow 7% in FY16. It further said if policies to improve India's operating environment are effectively implemented, and are accompanied by a strengthening of institutions, their impact will improve the sovereign credit profile over the medium term. However, it also said that policy progress is likely to be slow and unlikely to be reflected in near term economic indicators.
The report though is an annual update to the market, and does not constitute a rating action, but stated that as a commodity importer, India benefits from a low commodity price environment, and its reliance on domestic demand for GDP growth shields the economy somewhat from the subdued outlook for global growth and that India's rating could be upgraded if Moody's expectations of gradual but credit positive reforms are realized in actual policy implementation and if the recent improvement in inflation, fiscal and current account ratios is sustained.
Moody's noted that in addition to lower oil prices tighter fiscal and monetary policies have also helped restore India's macro-economic balance over the last two years and highlighted that this improved balance offers the Indian economy and financial system some resilience to potential volatility in global capital flows in coming months.