The Finance Ministry on Thursday challenged the methods used by Moody’s rating system to evaluate a country’s investor worthiness. India’s sovereign rating by Moody’s stands at ‘Baa3’, the lowest investment grade — just a notch above ‘junk’ status.
On Tuesday, Moody’s called India’s reform process slow and gradual with muted private investment, it added that bad loans posed a challenge to the economy. The global agency did say that it would reconsider the rating in a year or two if it was convinced that the reforms were ‘tangible’.
“Our concern was mainly about the methodology of the whole process… Of course, the rating agencies are free to arrive at their own conclusion…,” economic affairs secretary Shaktikanta Das said to Times of India.
“I thought the due process has to be followed and you cannot jump the gun,” he added.
It was only in April last year that Moody’s had changed India’s rating outlook to ‘positive’ from ‘stable’ citing reform momentum and had said that it could consider India for an upgrade in next 12-18 months.
TOI reports that during a meeting with the Finance Ministry on Wednesday, representatives from Moody’s said that a rating upgrade would happen only when the benefits of reforms could be felt on the ground and the country’s banking sector stabilises.
Defending the current government’s reforms Das said, “The depth of the reforms in India cannot be doubted. It is a unidirectional process for the last several years, especially in the last two years. The pace of reforms, and the pace at which reforms are undertaken by the government due weightage has to be given to that.”
“You cannot say that I will give zero weightage and I will wait till infinity to see that these reforms take roots…I don’t think…it should not be a kind of bottomless pit,” he added.
