Securitization can help fund growth agenda, says Moody's

The government will have to deepen the securitization market, which stood at Rs 49,000 crore last fiscal, to oil the economy that is expected to gather momentum after the investment push given in the Budget, says a report.
"While the government has injected its own capital to support various reform initiatives, securitization could play a significant role by providing funds to finance development projects," says Georgina Lee, an assistant vice-president at Moody's Investors Service, in a report titled 'Inside India'.
While securitization volumes rose 29 percent year-on-year to Rs 49,000 crore last fiscal, issuance levels have been volatile in recent years, due to regulatory and taxation considerations, which in turn have shaped the extent to which originators and investors have been motivated to tap into the securitization market, she said.

Calling for deepening the market, the report said the emergence of a broader set of investors will be important for developing the securitization market because the existence of a diverse range of investor types is key to a deeper, more liquid market and better price discovery.
Noting that the Budget prioritises growth over deficit reduction, with focus on infrastructure investment, Lee said this will increase the need for new sources of long-term funding.
Lee said the Budget proposals support the agency's expectation that the country's growth will remain stronger than the global average, and will be more robust than the median for similarly rated sovereigns.

"The Budget contains several measures which if effectively implemented, will accelerate growth. These include greater public spending allocations to infrastructure, as well as incentives for private sector investment in the sector," she said.
On the impact of the Budget on credit ratings, she said it will depend on whether its implementation facilitates growth that is primarily driven by government spending or growth that sets the stage for higher savings, investment, productivity and profitability.