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Officials from the Finance Ministry, along with other key Ministries and NITI Aayog, met with representatives from Moody’s at the North Block on Friday, pitching for higher ratings for the country. With strong economic indicators and better prospects, the country deserves better ratings, said government sources.
According to sources, these meetings happen every year. “This is not a forum to question the rating methodology or make a cross country comparison, but explaining the government’s assessment of the economy to help these credit agencies make their assessments,” a source said, adding that the meeting was held in the most cordial atmosphere.
Earlier, there were reports that the government questioned the parameters based on which the US-based agency accords ratings.
It may be noted that all agencies, including Moody’s, have accorded the last investment grade ratings (‘BBB-‘ or ‘Baa3’) to India. Moody’s, which had given ‘Baa2’ rating to India in 2017, made the downgrade in June 2020. Last month, Fitch, too, retained India’s rating at ‘BBB-‘ which was first accorded in August 2006. Similarly, S&P kept India’s rating unchanged at ‘BBB-‘ which it accorded first in 2007. Both the agencies have given stable outlook.
Track record
India has been pushing for a ratings upgrade for long. It has also been pitching for an amendment in sovereign credit ratings methodology, saying it should reflect economies’ ability and willingness to pay their debt obligations. Officials said India has never defaulted and does not appear to do so in the near future. Almost all its debt is exclusively in rupees and even, participation of foreign portfolio investors (FPIs) is in rupee bonds.
Therefore, there is never a case of forex risk for India. At the same time, the country is one of the largest recipients of FDI and is also high up on the FPI scale.
Even in terms of fiscal consolidation, India’s track record has been better. The country managed to close the deficit at 6.36 per cent of GDP in FY23, a tad below the revised estimate of 6.4 per cent. 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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