Business-oriented reforms recognized

The government has welcomed India’s latest rating by S&P Global which asserted business-oriented reforms but affirmed it at BBB-/A-3.

Defence Minister Nirmala Sitharaman noted that the rating report appreciated India’s efforts in improving monetary credibility.

S&P Global has lauded the Narendra Modi government for passing a number of reforms that address long standing impediments to the country’s growth.

These include:

Comprehensive tax reforms through introduction of GST to replace complex and distortive domestic indirect taxes;

Bankruptcy code;

Non-performing loan resolution framework;

Recapitalisation of state owned banks;

Simplification of regulations and strengthening the business climate;

Reforms in the energy sector; and

Improvement in contract enforcement & trade

The report has underlined that India’s government revenue as percentage of GDP is low. It further asserts that effort of the government to expand tax base by demonetization has increased the number of tax registrants and that Introduction of GST will further accelerate government revenue.

Reforms such as demonetisation and GST may have led to some quarterly cooling but the medium-term outlook for growth in India is favourable. This is based upon private consumption, ambitious public infrastructure investment program and a bank restructuring plan that will help investments.

On India’s external debt, the report has observed that external indebtedness is likely to remain contained throughout the forecast period underpinned by an improved current account deficit.

The report has observed that India’s contingent fiscal risks are limited, based upon a combined view of India’s govt related entities and its financial system.

S&P has hence inferred that over the next two years, growth in India will remain strong and India will maintain its sound external accounts position.

After World bank’s recognition of India’s reforms in improving ease of doing business and Moody’s upgradation for India’s sovereign credit ratings, S&P too has recognised the strides the Indian economy has made.

“All in all it is a very satisfying report. It shows that economy is strong and is improving further. And as per their projection pace of development, it will accelerate further in 2018-20,” said Railways and Coal Minister Piyush Goyal.

“The stable outlook reflects our view that over the next two years, the growth will remain strong. India will maintain its sound external accounts position and fiscal deficits will remain broadly in line with our expectations,” he said. fii-news.com