Moody's welcomes India's policy steps, but wants to see more

MUMBAI (Reuters) - Moody's welcomed recent efforts by India's government and the Reserve Bank to boost economic growth and attract long-term investments, but said the measures would need to be sustained to have an actual impact on the country's sovereign ratings.

Moody's Investors Service said steps such as Prime Minister Narendra Modi's "Make in India" campaign, infrastructure initiatives, improvements on monetary policy framework, and banking sector reforms were all "incremental, rather than radical" measures.

But Moody's said it wanted to see "sustained improvement" in the reform momentum for "over at least the next two years" to have an actual impact on India's credit ratings.

Moody's rates India at "Baa3", or the lowest investment grade, with a "stable" outlook. It was the only one among the three major global credit agencies not to downgrade India's outlook to "negative" over the past three years.

"Since India's sovereign rating already incorporates Moody's assessment that its growth potential is high, such higher growth rates would, in themselves, be of limited (though positive) significance for India's sovereign credit profile," the agency said.

Moody's said an assessment of India's credit ratings would only come after it sees sustained improvements in inflation, investment climate and policy predictability and transparency.

The credit agency added it wanted to see stronger fiscal, balance of payments and banking sector metrics.

(Reporting by Neha Dasgupta; Editing by Prateek Chatterjee)