India on Monday told global rating agency Moody's that it deserved higher rating, at least two notches above the present grade, on the back of improvement in basic economic parameters witnessed in the last few years.
“Moody's should take a fresh look at the long-term credit strengths of the Indian economy and consider a long due credit rating upgrade for India's sovereign rating,” a Finance Ministry official said after a meeting with Moody's representatives here.
The officials, led by Department of Economic Affairs Secretary R. Gopalan, impressed upon Moody's to upgrade India's rating to Baa1, two notches above its current rating. Moody's had last upgraded India's rating to ‘Baa3' (with stable outlook) in 2004. Baa3 means medium grade with moderate credit risk.
Besides, Moody's had assigned a ‘Ba1' with a positive outlook rating to India's local debt. India's long-term growth prospects arise from a high savings and investment ratio, favourable demographics, rapid progress in infrastructure development and a stable democratic polity.
“India has low external debt to GDP ratio, high foreign exchange reserves, deep domestic capital markets and diversified domestic holdings of sovereign debt. It outperforms its ‘Baa' peers on these indicators,” he added. Last week, the rating firm had lowered the outlook on the Indian banking sector to negative from stable saying that slow global economic growth could impact profitability.
The move did not go down well with the government and the bankers who termed the move as unwarranted and said the Indian banks are better off than their global peers.
The official said the government was actively working towards structural reforms in the economy.
In the meeting, the Finance Ministry officials told Moody's that the policy measures by the government included fuel price hike, clearing 51 per cent FDI in multi-brand retail by the Committee of Secretaries and increasing of the FII investment limit in infra bonds to $25 billion, among others.
They added that the government was on the path of fiscal consolidation for the last seven years, but it was interrupted by the global financial crisis in 2008.
“Indian economy has shown significant improvement in FDI flows and total exports this year. Due to uncertainties in the global financial markets, they have been muted this year, but are expected to pick up soon,” the official added. The meeting was also attended by Chief Economic Adviser Kaushik Basu and officers from different departments in the Ministry of Finance, Power, Fertiliser and Petroleum and Natural Gas.