Moody's says India can get rating upgrade, but only if Modi govt's reforms are tangible

Just a day is left before it interacts with government officials, but International rating agency Moody's Investors Service says it would still want to upgrade India's rating in one-two years if it is convinced that reforms are "tangible".

The New York City-headquartered rating agency cited evidence of policymakers working towards faster fiscal consolidation, reducing the debt-GDP ratio and addressing infrastructure and monsoon volatility challenges as reasons that could determine an upgrade.

It listed six measures on the list of pending reforms — land acquisition bill, labour law, significant infrastructure investment, tangible benefit from Make in India initiative, tax administration and public sector bank reforms.

"We have a positive outlook on India. On balance, the risk is on the upside. We are continuously monitoring the rating. We see pressure building up in one-two years and any tangible change could bring about a change in rating," Marie Diron, senior vice president of Moody's Sovereign Group told the media on Tuesday.

In April 2015, Moody's Investors Service had revised India's outlook to positive from stable and said depending on progress on reforms it could upgrade the rating in 12-18 months.

When asked this time if it felt policies were moving in the direction as envisaged by Moody's for an upgrade, Diron said, "We have seen progress in implementation of reforms. What we did not anticipate is the weakness of private investment."

She further said, "Reforms have been slow and gradual and we are waiting for that confidence that reforms will be tangible and able to change investor confidence, and corporates start seeing improvement in business environment."