As suggested by our puppet ex-Prime Minister, Dr Manmohan Singh, though Moody’s have upgraded India’s ratings, the economy seems to be caught in the woods as of now. The fact holds enough arbitrariness as, the fact that there is no possibility of a perfect analysis of the economy which yields a perfect blend of the macro and micro-economic assessments.
The recent upgrade by the Moody’s has come after a long dead years of negative listing of India Inc by Moody’s in 2007. The BJP is merry because the ratings have improved the image of the government with its reform driven agenda getting a new life. The Congress has too much to lose as it was lobbying for a rating upgrade in 2013 when the economy was possibly good.
Today, though all the micro-economic credentials of the Indian economy must be registering a slow growth, the overall performance of the economy has dipped. The macro indicators also do point to the same.
The ratings have to be read in a way that adds value to the upgrade and the overall efforts by the stagnating economy since the liberalisation.
The Modi government has pushed and implemented the risky reform measures like the Demonetisation, GST implementation, Insolvency code, recapitalising the banks, and regulating the trade in gold while pushing the insurance sector to expand and grow.
The Moody’s ratings now focus at the long-term effects these moves will have while keeping the note of the current macro-economic credentials of the economy.
The GDP-to-debt ratio has been keeping at an average of 6%, while the RBI has very carefully managed the inflation. The banks plush with liquidity have also managed to see a stable growth in the loan system. The Moody’s ratings hint at a disciplining of the economy, where the loopholes are being fixed.
The BAA rating is not a very sound figure for one of the world’s fastest growing economies as explained by the BJP, yet there is still more to the rating. The government has announced farm loan waivers, which will have a positive impact in boosting the morale of the farmers across states to take up to farming. The lustre of the farming business in India has gone as the green revolution withered away, thus the overall farm productivity might take a beating leading to food crisis, which has been managed well by providing farm loan waivers and crop insurance. It is to be noted that the crop insurance is a new feature in India.
Moreover, it is not just these measures, the recap exercise which will plug the holes in the bank balance sheets will also be a life saver. If the Congress believes that the economy was fie and the moves implemented by Modi are not good, then they need to revise their performance and the maniacal policy paralysis.
The ratings also assume significance in the backdrop of inclusion of new taxpayers, giving a push to electronic modes of banking, de-registering shell companies, and approving a GST Anti-Profiteering Authority. This will have assured long-term results thus there is a sense of confidence in the Indian markets.
There is very different perspective to the Moody’s upgrade for the Indian economy, which assumes significance in the long running macroeconomic health of the country.