The “ achhe din ” (good days) that Prime Minister Narendra Modi promised may be near at hand, going by the upbeat assessment of Credit Suisse, which senses that India is “on the cusp of a major growth phase.”
A report released by analysts at the investment bank after a recent visit to India said that companies see “positives” from government policies, including an anti-corruption focus, a level playing field “without favouritism”, “clear policies” and an earnestness among Ministries and state-owned companies to implement policies.
These policies, the report added, “are not empty statements, they are being pursued vigorously.” India, it summed up, “looks to be firing at last.”
However, that gung-ho optimism about the prospects for the Indian economy does not appear to be widely shared. The ratings agency Moody’s pointed on Tuesday to lingering weaknesses in the economy and indicated that a review of the country’s sovereign ratings must await “more evidence” of healthy growth over the next year or two.
Addressing a joint press conference with ratings agency ICRA, Marie Diron, Senior-Vice President, Sovereign Risk Group, Moody’s Investors Service, said, “There has to be more evidence over time of faster fiscal consolidation, more tangible reforms and resolution of the asset quality of the banking sector.”
Her assessment came a day ahead of meetings with Economic Affairs Secretary Shaktikanta Das and senior Finance Ministry officials.
India currently has a Baa3 sovereign rating with a positive outlook from Moody’s, but has been pitching for an upgrade.
Diron, however, said that despite progress in implementation of reforms, an upgrade would take longer owing to continued weakness in private sector investments. Similarly, while the banks’ bad asset recognition was a first step, it would not strengthen banks’ resilience or reduce the contingent liability risks for the sovereign.
A Moody’s press release, however, noted that a “consumption catch-up would continue to support robust GDP growth in the medium term.”
Independent economists were similarly conflicted on the prospects for the economy. JNU Professor CP Chandrasekhar said there was “not much reason to believe” that the situation was better than earlier. “There are still questions over the GDP data,” he said. The large NPAs in the banking sector would impact credit growth and, in turn, affect demand, he added.
“Similarly, inflation is not always range-bound. Our exports are collapsing due to the slowdown in the global economy, though it is partly offset as imports are also collapsing,” Chandrasekhar said.
On the other hand, NR Bhanumurthy, Professor, National Institute of Public Finance and Policy, claimed that many of the government’s initiatives “are having an impact that has improved the macro-economic situation.” He acknowledged that there was some ambiguity on the Centre’s fiscal math, but noted that there had been much progress in the banking sector.