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  3. India makes strong pitch for sovereign rating upgrade with Moody's

India makes strong pitch for sovereign rating upgrade with Moody's

19 Jun 2023 Evaluate

Highlighting the government's assessment of the economy, India has made a strong pitch for a sovereign rating upgrade with Moody's. Ahead of its annual review of the sovereign rating, Moody's Investors Service representatives met Indian government officials. Moody's Investors Service has a 'Baa3' sovereign credit rating on India, with a stable outlook. 'Baa3' is the lowest investment grade rating. A higher rating for India would mean the nation is less risky, translating into lower interest rates on borrowings.

Moody's Investors Service representatives acknowledged the positives of the Indian economy, and said that they are hopeful for a rating upgrade from Moody's. Moody's representatives discussed the government's disinvestment roadmap and officials highlighted that disinvestment should be seen from the prism of reform and not just revenue generation exercise. The government officials highlighted India's ongoing economic reforms, government thrust on infrastructure development and forex reserves nearing $600 billion. India has long been questioning the methodology adopted by international agencies while according credit rating and has nudged them to become more transparent and less subjective. It has been pitching for amendment in sovereign credit ratings methodology saying it should reflect economies' ability and willingness to pay their debt obligations.

In June 2020, Moody's downgraded India's rating to 'Baa3' from 'Baa2' with a negative outlook, citing a weak reform push and slow growth. In October 2021, the outlook on the rating was revised to stable. The government had largely met its fiscal objectives over the past two years. The fiscal deficit, which is the difference between government expenditure and revenue, narrowed to 6.4 per cent of GDP in 2022-23 fiscal, from 6.7 per cent of GDP in the 2021-22 fiscal. In the current fiscal, the deficit is budgeted at 5.9 per cent of GDP. As per the fiscal consolidation roadmap, the government intends to bring down the fiscal deficit below 4.5 per cent of GDP by 2025-26.

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