India criticised Moody’s methods and pushed aggressively for an upgrade but the ratings agency declined to budge citing concerns over debt levels, fragile banks.
New Delhi: India criticised Moody’s ratings methods and pushed aggressively for an upgrade, documents reviewed by Reuters show, but the US-based agency declined to budge citing concerns over the country’s debt levels and fragile banks.
Since coming in power, Modi has unveiled measures to boost investment, cool inflation and narrow the fiscal and current account deficits, but his policies have not been rewarded with a ratings upgrade from any of the “big three” global ratings agencies, who say more is needed.
— Aditya Kalra (@adityakalra) December 23, 2016
In its exclusive report, Reuters stated that correspondence between Indian officials and Moody’s shows that New Delhi “failed to assuage the ratings agency’s concerns about the cost of its debt burden and a banking sector weighed down by $136 billion in bad loans”.
The letters which reportedly written in October 2016 by Indian government , in which the finance ministry questioned Moody’s methodology of calculating rating , saying it was “not accounting for a steady decline in the India’s debt burden in recent years.” The agency was accused of ignoring India’s levels of development when assessing its fiscal strength, the report said.
Rejecting those arguments raised by Modi Government, Moody’s said India’s debt situation was not as rosy as the government maintained and its banks were a cause for concern, the correspondence seen by Reuters showed.
Where as Arvind Mayaram, a former chief finance ministry official, called the government’s approaching Moody’s is “completely unusual” and shameful.“There was no way pressure could be put on rating agencies,” Mayaram told Reuters. “It’s not done.”
In August 2015, almost four months after it revised India’s outlook to ‘positive’ from ‘stable’ and set a GDP growth target of 7.5% for 2015, Moody’s revised its GDP growth projection to 7%.
Recently, Moody’s said the shock ban on high-denomination currency notes will in the near term significantly disrupt economic activity and lead to weaker growth, but in the long run can boost tax revenues and translate into faster fiscal consolidation.
Source : The News Minute