The Hindu : Govt., industry hail Moody's upgrade

Online edition of India's National Newspaper
Saturday, Jan 24, 2004

Business

Business

Govt., industry hail Moody's upgrade

By Our Special Correspondent

NEW DELHI, JAN. 23. The Central Government and the industry today reacted favourably to the decisions by two leading credit rating agencies abroad, Moody's and Fitch, to upgrade the country's foreign currency rating saying it would help reduce the cost of borrowing abroad. The Chief Economic Advisor, Ashok Lahiri, who described it as a welcome move, said it had been `utterly conservative' to assign India's rating as speculative grade. The Finance Minister, Jaswant Singh, was also quoted as saying the upgrade would be beneficial from the economy as corporates can now borrow at lower interest rates.

Fitch made the upgrade from BB to BB+ on January 21 while Moody's upgraded the foreign currency rating from Baa1 to Baa3 with stable outlook. The upgrades have come at a time when the Government has been proclaiming the `feel good factor' in the economy as one of the highlights of the NDA's governance in the run up to the elections.

The two leading industry associations, the Confederation of Indian Industry (CII) and the Federation of Indian Chambers of Commerce and Industry (FICCI) have also welcomed the decision to give India a higher rating.

The CII President, Anand Mahindra, said with this, India's rating had crossed an important threshold and moved from speculative to investment grade. Arguing that this should have come much earlier, he said the re-rating reflected the improvement in the perception of India's economic fundamentals among foreign investors. For the last two years, strong capital inflows together with a surplus on the current account had resulted in a large increase in India's foreign currency reserves. He pointed out that this made the possibility of default on external obligations extremely unlikely.

Mr. Mahindra noted that Indian companies would now be able to access cheaper finance abroad from a wide range of investors.

In a statement, FICCI said this was an international recognition of strong fundamentals of the Indian economy and reflects the current economic boom in the country. "It is a very positive signal", the chamber said.

The chamber felt that with economy on its current course Moody's would further revise upwards India's credit rating in the recent future.

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