Global credit ratings agency Moody’s Investors Service’s decision to upgrade India’s sovereign rating for the first time in almost 14 years has got a thumbs up from India Inc.
“The fact that each intervention of the Modi government was a progressive one was unmistakable,” Harsh Goenka, chairman, RPG Enterprises. “Clearly Moody’s upgrade of India is a validation of the government’s intent and resolve. The recent improvement in ease of doing business and now the rating upgrade underscores the direction that India is moving in. It should result in better investor sentiment towards India.”
The credit ratings agency raised India’s rating by one notch to Baa2 from Baa3.
Sunil Bharti Mittal, chairman, Bharti Enterprises, said the ratings upgrade underlines the efficacy of the ‘bold’ structural reforms undertaken by the government in recent years.
“It clearly shows that the economy is turning the corner and poised for a big leap forward, highlighting the immense potential that India offers as a global investment destination. More importantly, it also emboldens the government to stay true to the path of strong and transformational reforms in the coming days,” he said.
Private sector capital
Moody’s also revised its outlook on India to ‘stable’ from ‘positive’, citing the series of reforms that the government has undertaken.
Welcoming the move, Larsen & Toubro’s MD & CEO S.N. Subrahmanyan, said private sector capital will still take some time to come back into the economy. “The economy is currently going through a definite churn, and the rating upgrade augurs well for the country, the economy, and the business. This is an outcome of various deep-rooted reforms that are taking place in the Indian economy. We believe that the private sector capital will still take some time to come back into the economy. The central government, public sector undertakings, and state governments are expected to drive capital expenditure for another 9-12 months,” said Mr. Subrahmanyan.
Gagan Banga, VC & MD, Indiabulls Housing Finance, said that the ratings upgrade would accelerate GDP growth. “This is a huge reaffirmation that Modi government has brought India back on track & this along with improvement in ease of doing biz published by world bank indicates that GDP growth will definitely accelerate . This should help keep interest rates in India benign over an extended period of time,” said Mr. Banga.
State owned firms have a reason to cheers as the ratings of infrastructure government-related issuers (GRIs) NTPC, NHPC, NHAI and GAIL have also been upgraded to Baa2 in line with India’s sovereign ratings.
Besides, Moody’s has upgraded the foreign currency issuer ratings of BPCL, HPCL, IOCL, Petronet LNG Limited to Baa2 from Baa3, while ONGC has been upgraded to Baa1 from Baa2.
The ratings upgrade will help the Indian firms to borrow in foreign currency at a cheaper rate and for the energy firms, the cost of crude oil imports will come down due to stronger rupee.
Mukesh Kumar Surana, CMD, HPCL told The Hindu , “As of now, HPCL has $1.6 billion of borrowings in foreign currency. Given we have a capex of ₹60,000 crore for the next five years, we will benefit in borrowing from overseas.”
Ratings for FIs
Moody’s also upgraded the long-term rating of four financial institutions, Export-Import Bank of India, HDFC Bank, Indian Railway Finance Corporation, and State Bank of India, to Baa2 from Baa3.
“The rating upgrade of SBI indicates that the Indian financial system remains resilient, robust and poised to support growth,” said Rajnish Kumar, chairman, SBI. The bond yields, Indian Rupee and Stock Markets have already reacted favourably. “Over a point of time, this will reduce borrowing costs of Government and Financial Institutions and result in increased investor confidence in the India growth and reform story.”
(With inputs from Piyush Pandey, Yuthika Bhargava and Manojit Saha)