Citing UIDAI & GST, India makes case for ratings upgrade with Moody's

NEW DELHI: The government has made a strong pitch for an upgrade of the country's sovereign rating with the international ratings firm Moody's, outlining a clear road map for how it plans to rein in subsidies through the unique identity framework to improve government's fisc.

Unfortunately, for New Delhi the review comes at a time when the country is likely to miss its fiscal goal posts and the current account deficit may worsen.

"India's credit strengths are much more than most 'Baa' rated sovereigns," said a finance ministry official.

An upgrade will allow Indian companies to raise funds at competitive rates. Moody's has rated India Baa3, two notches above investment grade rating, with a stable outlook. The domestic debt is rated at "Ba1" with a positive outlook. The upgrade pitch is to preclude any downgrade following a deterioration in macro-economic fundamentals.

India is widely expected to miss the fiscal deficit target of 4.6% of GDP, the current account deficit is expected to worsen to 3% of GDP from 2.6% in 2010-11, inflation has remained sticky at over 9% for eleven months, industrial growth has slowed down sharply and monetary tightening is now seen ineffective in dampening price rise.

Moody's has recently downgraded India's banking sector from 'stable' to 'negative'.

Economic Affairs Secretary R Gopalan and Chief Economic Advisor Kaushik Basu led the team of official of finance, petroleum and power ministry in the deliberations with 3-member Moody's team on Monday.

A detailed presentations to the rating agency by the North Block has highlighted India's 'abundant' capacity to finance its public debt, a series of reforms and comfortable debt situation.