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The Finance Ministry on Monday told global rating agency Moody's to upgrade the country's rating, at least two notches higher than the present grade, as there was a marked improvement in its basic economic parameters in the past few years.
“Moody's should take a fresh look at the long-term credit strengths of the Indian economy and consider a long due credit rating upgrade for India's sovereign rating,” a Finance Ministry official said after a meeting with Moody's representatives here.
The Finance Ministry officials, led by the Department of Economic Affairs Secretary, Mr R. Gopalan, asked Moody's to revise India's rating to Baa1, two notches above its current rating. The rating agency had last upgraded India's rating to ‘Baa3' (with stable outlook) in 2004. Baa3 means medium grade with moderate credit risk. Besides, Moody's had assigned a ‘Ba1' with a positive outlook rating to India's local debt.
The official said that high savings and investment ratio, favourable demographics, infrastructure development and a stable democratic polity were good for India's long-term growth prospects.
“India has low external debt-to-GDP ratio, high foreign exchange reserves, deep domestic capital markets and diversified domestic holdings of sovereign debt. It outperforms its ‘Baa' peers on these indicators,” he added.
Last week, Moody's had lowered the Indian banking sector's outlook to ‘negative' from ‘stable' as it felt that slow global economic growth could impact the sector's profitability.
The Government did not take this well, with Indian bankers terming the move as “unwarranted”.
In Monday's meeting, the Finance Ministry officials told the rating agency about the policy measures taken by the Government, such as fuel price hike, clearing 51 per cent FDI in multi-brand retail by the Committee of Secretaries and raising of FII investment limit in infra bonds to $25 billion.
“The Indian economy has shown significant improvement in FDI flows and total exports this year. Due to uncertainties in the global financial markets, they have been muted this year, but are expected to pick up soon,” the official added.
The meeting was also attended by the Chief Economic Adviser to the Ministry, Dr Kaushik Basu, and officers from the Ministries of Finance, Power, Fertiliser and Petroleum and Natural Gas.
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