Financial Daily from THE HINDU group of publications
Friday, Oct 17, 2003
Financial Daily from THE HINDU group of publications Friday, Oct 17, 2003 |
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Economy Industry & Economy - Economy Moody's may upgrade foreign currency debt rating Our Bureau
Mumbai , Oct. 16 INTERNATIONAL rating agency Moody's Investors Service today said it might upgrade India's foreign currency debt rating in view of the country's strong external position. However, the agency has affirmed its negative outlook on India's domestic currency rating. In a statement issued today, Moody's said it has placed "India's `Ba1' ceiling for foreign currency debt on review for possible upgrade, an action that reflects primarily the ongoing improvement in the country's external position." The government's `Ba1' foreign currency issuer rating was also placed on review for possible upgrade. At the same time, the rating agency affirmed its negative outlook on the Indian government's `Ba2' domestic currency rating and the `Ba2' ceiling for foreign currency bank deposits in consideration of the government's dire fiscal situation. Bankers and market players did not give much importance to the rating agency's statement today. A banker, however, said a rating upgrade could enable Indian borrowers to get funds at competitive rates at international market. Moody's said official foreign currency reserves have continued to grow, reaching $83.8 billion (excluding gold) earlier this month, equivalent to about 10 months of current account payments as well as amply exceeding external debt service requirements. Although large capital inflows are exerting upward pressure on the exchange rate, which is being blamed for the recent slowdown in export growth, the current account remains in a small surplus position. Additional liberalisation of external borrowing and deposit repatriation regulations and lower domestic interest rates may ease these pressures going forward, and thereby reduce the system's vulnerability to purely speculative inflows. Moody's said the Indian economy is recovering from last year's drought-induced slowdown and real growth is expected to reach 7 per cent this year. India is also gaining ground as a destination for international companies seeking to outsource back office operations, but the volume of FDI is still low. By contrast to the strengthening external situation, India's negative fiscal situation is not being addressed vigorously, says Moody's, and in fact has deteriorated in recent years.
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