Moody's raises India outlook to positive
New Delhi, November 17 (UNI)
Moody's investor services has upgraded its outlook on India's foreign and domestic currency debt ratings, stating that the National Democratic Alliance government has a fresh chance to make market-oriented changes at the start of what could be a longer term in office.
In its latest report on India, the US-based rating agency raised the outlook to positive from stable for the country's BA2 ratings on these two fronts.
Besides increased chance of economic reforms picking up pace, the premier rating agency attributed rise in the outlook to additional explanations for renewed optimism derived from the country's ability to withstand last year's emerging markets crises and nuclear sanctions as well as the improved maturity structure of its external debt.
Signs of industrial growth recovering after three years of weak performance indicate that corporate restructuring is paying off, especially in the private sector, where companies are focusing increasingly on their core competencies, the report said.
Moody's said the oft-repeated remarks on irreversibility of direction of economic reforms contains more than a grain of truth -- the problem has been more the pace of this reform rather than its path.
The agency also pointed out to the troublesome structural challenges that constrain India's rating, particularly heavy public debt and debt service burden, labour market and bureaucratic rigidities, infrastructure shortfalls, and heightened regional tensions with Pakistan.
Budgetary imbalances are pervasive at all levels of the public sector, the report noted. Although the government consistently aspires to a more prudent fiscal policy, the reality nearly always disappoints,.
The report said analysts remain concerned that India's large trade and current account deficits, which have increased its dependence on potentially volatile capital inflows, might widen further in the near to medium term.
Moody's report indicates that the country's macroeconomic policy framework has placed too little emphasis on achieving concrete results despite decades of economic plans. Over the medium term, India's growth rate will need to be higher than approximately 6 %.
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