FinMin officials to meet global rating agencies next week, may seek upgrade

The finance ministry officials will meet global rating agencies next week and may pitch for sovereign ratings upgrade for India, sources said.

The meetings will begin with representatives from Moody's Investors Service on September 28 , they added.  

The ministry plans to present the economic recovery in the aftermath of the pandemic in support of its demand for rating upgrade. It would also stress on the fiscal position and how it has shown improvements despite the havoc created by the second wave of Covid.

The sources said after taking data from the government, the rating agencies also take feedback from economists from different countries, investment bankers, as well as public and private players.  

The sovereign ratings of the economy are among key factors for foreign institutional investors to allocate investments. This is why the government wants to put more focus on these global platforms to boost investment.

Moody’s had cut India’s sovereign rating by a notch to the lowest investment grade in June last year, pointing towards the economy's structural weaknesses, weak policy effectiveness, and slow reforms momentum even before the Covid-19 pandemic. It had assigned a negative outlook to its ratings.  

The change had brought Moody’s rating on par with Fitch and Standard and Poor’s, both of which rate India at the lowest investment grade. However, S&P has a stable outlook to its ratings on India.  

In May this year, Moody's had said India's economy rebounded quickly from a steep contraction in 2020, but a severe second wave of the coronavirus has increased risks to the outlook with potential longer-term credit implications. Risks to India's credit profile, including a persistent slowdown in growth, weak government finances and rising financial sector risks, have been exacerbated by the shock, it had said.

India's economic growth rose to a record 20.1 per cent in the first quarter of the current financial year on the low base of contraction by 24.4 per cent in the corresponding period of 2021-22. The GDP at constant prices was still 9.2 per cent lower than in the first quarter of 2019-20, which is in the pre-pandemic period. Growth during April-June FY22 was 16.9 per cent lower than in the previous quarter, Q4 of FY21.

The Centre's fiscal deficit rose to 9.5 per cent of GDP in 2020-21 from the Budget Estimate of 3.5 per cent due to increased expenditure on various schemes by the government to address Covid-related woes and the adverse impact of lockdowns on revenues . The deficit was projected to be 6.8 per cent of GDP in the current financial year due to transparency in subsidies regime and increased capital expenditure to boost economic growth.

The deficit had touched 21 per cent of BE in the first four months of the current financial year against 103 per cent in the corresponding period of FY '21.

However, rating agencies take the combined fiscal deficit of the states and the Centre into account while assessing the credit rating of the economy. Combined fiscal deficit of the states and union territories stood at 3.2 per cent of GDP, according to deficit figures given in their budgets. So the general fiscal deficit stood at 12.7 per cent in FY21.