Moody’s rating upgrade a fillip for India

NEW DELHI - Moody’s Investors Service has upgraded India’s sovereign rating to Baa2 from Baa3 with a stable outlook. This puts Moody’s one notch ahead of S&P and Fitch, which have India on BBB- (stable).

Commenting on the move, ANZ Bank points out that, although recent economic reforms in India have had near-term negative growth effects, there have been some benefits. India moved up 30 places to 100th in the latest World Bank’s ease of doing business ranking, and the Moody’s upgrade is seen as another validation of the Government’s reforms.

“We expect Indian policymakers to continue to push forward with structural reforms,” ANZ says. “The resolution of bank non-performing assets (NPAs) will be of paramount importance to revive the investment cycle and GDP growth.”

ANZ says the rating upgrade bodes well for inflows into the local bond market, which has already seen strong inflows this year.

“We could get close to the record annual foreign bond inflow of US$26 billion achieved in 2014,” ANZ says. “Further inflows will help support the INR.

“However, we remain watchful of the Government’s fiscal consolidation path post-GST and the upcoming State election results, which could impact the rupee in the short term.”  www.live.anz.com (ATI).