Questioning the methodology adopted by Moody’s, the Finance Ministry today said the global agency has ignored reforms initiated by the government and it should not wait “till infinity” for them to take root before upgrading the country’s sovereign rating.
“Our concern was mainly about the methodology of the whole process... Of course, rating agencies are free to arrive at their own conclusion,” said Economic Affairs Secretary Shaktikanta Das.
“I thought the due process has to be followed and you cannot jump the gun,” he said alluding to Moody’s making certain comments in public a day before having met the Finance Ministry.
Calling the reform process slow and gradual with muted private investment and bad loans posing a challenge, Moody’s said on Tuesday it could upgrade India’s rating in a year or two if it is convinced that reforms are “tangible“.
India’s sovereign rating by Moody’s stands at ‘Baa3’, the lowest investment grade — just a notch above ‘junk’ status.
Das added: “We found the methodology to be deficient.
“That is something we pointed out. So we expressed our serious concerns about the methodology. Then, there were other issues. We explained to them about the reforms taking root and developing sufficient depth.”
During the meeting with the Finance Ministry on Wednesday, representatives from Moody’s are learnt to have said that a rating upgrade could be a reality when the benefits of reforms could be felt on the ground and the country’s banking sector stabilises.
Das said: “The depth of the reforms in India cannot be doubted. It has been a unidirectional process for the past few years, especially the last two years.”
Due weightage would have to be given to the “pace at which reforms are undertaken by the government.”
He further added: “You cannot say that I will give zero weightage and I will wait till infinity to see that these reforms take root... It should not be a kind of bottomless pit.”