India strongly pitched its case for a sovereign rating upgrade as Chief Economic Advisor V Anantha Nageswaran and senior government officials met executives of Moody's Investor Services.
The government is hopeful of an upgrade after discussing various rating parameters such as the budget, disinvestment targets, and borrowings, according to a senior government official who spoke on the condition of anonymity.
S&P and Fitch rate India at 'BBB-' and Moody's at 'Baa3', the lowest investment grade. The outlook is stable.
Other emerging economies are rated higher than India, the official quoted earlier said. Moody's acknowledged the positives of the Indian economy but a rating action won't be a knee-jerk reaction, the official said.
According to a second official, who also spoke on condition of anonymity, these are routine and are part of a series of interactions that take place over the course of an year. They are not intended to compare countries' ratings and question the methodology, the person said.
Instead, it is a forum to explain the government's assessment of the economy to help the credit agencies make their judgment. The meeting was held in a cordial atmosphere, the official said.
Sustained Growth Momentum
The Indian economy is estimated to grow 7.2% in FY23. The momentum has sustained with the risks being more evenly balanced now than a few months before, Nageswaran had said in May after the fourth-quartet GDP expanded 6.1%.
The economy is performing well when compared with other emerging and a few advanced peers who are battling inflation, he said.
CPI Inflation moderated to 4.25% in May, a 25-month low, falling within the RBI tolerance band of 2%-6%. There are signs of growth in private investment and the development of India's digital public infrastructure, he said.
For FY24, both the RBI and the Finance Ministry have pegged growth at 6.5%.
CEA Leading The Charge
India has been batting for a positive revision by S&P, Fitch, and Moody's.
The chief economic advisor met industry associations in Lucknow, Kolkata, and Chennai over the past week regarding the growth prospects and the sustained growth outlook for India.
India will aim to stick to its fiscal deficit glide path, he said while speaking in Lucknow on June 9. The government hopes to achieve a fiscal deficit of 4.5% of the GDP by FY26.
"…there is no second opinion on achieving the fiscal deficit number and getting a better credit rating," he said. "This is not a question of prestige but about putting more money in the hands of the people, as a better credit rating would bring down interest rates."
"A change in credit rating from even 'BBB-' to 'BBB+' could reduce the cost of borrowing by 100 bps," he told the gathering in Lucknow.
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