Background And Future ImplicationsRecently Moody’s upgraded India’s local and foreign currency issuer ratings from Baa3 to baa2, changing its status from ‘Positive’ to ‘Stable’. Currently, It is higher than Russia, Brazil, South Africa but lower than China. ( BRICS Countries )
Moody’s: What is it?Moody’s additionally referred to as Moody’s Investor Service is a vital part of worldwide capital market, providing ratings, researchers, tools and analysis that contribute to transparent and integrated financial markets.
Reasons: Why India got such a good rating after 14 years?India got such a good rating due to some of the following reasons :
Reforms in Economy:In recent years Indian Government has taken some bold steps for reducing corruption, digitization of economy, demonetization which decreased black money to some extent and a major tax reform by implementing GST in the country. These steps have brought clarity and transparency to the economy.
Foreign Investments:There has been a significant rise in the foreign investments due to the programmes like Make In India and various MoU signed by India with some other countries like Japan, Singapore etc. It gave enough credibility about the economic status of the India. In addition, India’s forex reserves have witnessed an impressive surge, making it around $400 billion.
Banking Reforms:Indian Government is trying its best to deal with problems in the banking sector. Problems like Insolvency and Twin Balance Sheet are to be solved by Insolvency and Bankruptcy Board Of India and recapitalization of banks. Recently the mergers of banks have been seen, making it another step to strengthen the economy.
- India’s 100th rank in World Bank’s Ease of Doing Business gave a sign of reduction in red-tapism, bottlenecks in financial services which improved its image as a nation with positive changes in the economy.
- Moody’s also expect a moderate growth in India’s GDP to 6.7 percent in fiscal year ending in March 2018.
Implications of a positive rating for India:
- It will attract the foreign investment. More companies and countries will try to expand their business in India.
- Due to various investments in future, India would not want to lose this opportunity, hence more positive reforms could be seen in future in the economy.
- A significant rise could be seen in the jobs when the economy faces new opportunities with a better business climate.
- It would allow India to borrow loans at cheaper rates due to its credibility.
- India being a developing country needs these types of positive ratings for a boost in the economy. But ratings do not come for free, India needs to take more steps to strengthen its economy as being one of the biggest countries in the world, 100th ranking in Ease Of Doing Business still indicating something more need to be done. With government”s commitment and effective policy implementation positive results can be achieved in the future.
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