Raising optimism over the government's commitments to improve economic efficiency, the SBI Research in its latest report has said that India would need not wait for 13 long years for the next sovereign upgrade by a rating agency, with government’s resolve on fiscal consolidation target along with recent reform measures like Goods and Services Tax (GST) and Bankruptcy and Insolvency code.
The report pointed that the government’s Rs 2.11 lakh crore recapitalisation plan will help banks to tackle the bad loan problem and will also give a push to improve their health. The report further highlighting implementation new tax regime and RERA, said that these moves will improve overall economic and investment sentiment in the country.
The report also noted stability in the country’s inflation and sustainability in current account deficit. However, it raised concern that the markets would factor in a higher fiscal deficit in 2017-18 and it blamed GST for this, as it impacted the centre's short-term revenue. SBI Research report further suggested that the Reserve bank should stop further Open Market Operations (OMO) sales for now as it has been sucking out liquidity since July through OMO.