Reform or perish, Moody’s again tells politicians

A report that has come a day before parliament begins its session speaks of loss of momentum due to failure to carry out reforms

GN Bureau | November 25, 2015



On the eve of parliament session there is warning again for the political class to act on economic reforms, forgetting party divide. Legislative business has come to halt due to tug of war between the government and the opposition. And it cannot be allowed to continue if India has to progress and Indians to prosper.

The alarm bells are in the form of a report released today. Moody's Investor Services has again warned the government on sluggish economic reforms. The rating company sees the government's inability to get reforms approved as a major hurdle.

It cautioned that a loss of momentum on reforms may hamper investment and prove to be a ‘downside factor’ for Indian companies. The report said most corporates will benefit from strong economic fundamentals and accommodative monetary policy.

It further said that weak global cues and an impending US rate hike may also have an impact on Indian businesses.

The report particularly touched upon the political stalemate. "The Modi administration so far this year has been unable to enact legislation on key reforms, including a unified goods and services tax (GST) and the Land Acquisition Bill," Moody's said in the research report.

The ruling NDA government has said it is willing to discuss with the Congress to get the GST bill passed in the winter session of Parliament beginning tomorrow. The passage of the bill in the forthcoming session is essential to ensure rollout of GST from April 1, 2016.

 “A healthy 7.5 per cent GDP growth for India for the fiscal year ending March 2017 and a pick-up in manufacturing activity will be broadly supportive of business growth,” Moody’s VP and Senior Credit Officer Vikas Halan said.

“It seems highly unlikely that the major reforms will get enacted by the Upper House of Indian Parliament where the ruling coalition is in minority,” Halan said.

By sector, Moody's expects upstream oil and gas companies to benefit from lower fuel subsidy burdens, although low crude and domestic natural gas prices will continue to hurt profitability.

In the real estate sector Moody's expects demand to improve in 2016 on the back of lower interests rates, although approval delays could push back project launches for property developers.

The fall in commodity prices has benefited many Indian corporates given the country’s status as a net importer of raw materials and its recent history of high inflation. But low commodity prices will result in deterioration of credit metrics of metals and mining companies, it said.

The other ‘downside factors’ listed by Moody’s in its report are loss of reform momentum leading to annual GDP growth falling below 6 per cent, resulting in a deterioration of credit metrics. Also higher interest rates brought on by rising inflation and/or exchange rate volatility, resulting in a tight funding environment is a factor.

Comments

 

Other News

State ownership has been blatantly unsatisfactory: Oxford professor

A wide swathe of economic activities was nationalised in India after independence, and especially during Indira Gandhi’s prime ministership, for predominantly political reasons. But state ownership was also justified as a way to correct market failures, increase investible surpluses, and pursue wider

Scientists must use common man’s language: Mashelkar

Calling for improved communication in the field of science and technology, eminent scientist and chairman, National Innovation Foundation, Dr Raghunath Mashelkar has said that it is important to advance knowledge and people need to know how that knowledge is for their own good. “Public awaren

Did the Rajasthan health department do the right thing by sending data on Muslim staff to centre?

Did the Rajasthan health department do the right thing by sending data on Muslim staff to centre?

80 percent abortion in India through medicines: Lancet

 Three in four abortions in India are through drugs from chemists and informal vendors rather than from health facilities, said a report in The Lancet. An estimated 15.6 million abortions were performed in the country in 2015, reports The Lancet in its latest released paper on ‘Inciden

A turbulent journey so far for seaplanes in India

Prime minister Narendra Modi’s seaplane ride in Gujarat is certainly unique, but it is not as historic as it is being made out to be. Gujarat chief Minister Vijay Rupani said this is for the first time in the history of the country that a sea-plane will land on a water body and that wi

GAIL fast tracks implementation of Pradhan Mantri Urja Ganga project

 GAIL has awarded a contract for laying 520 km gas pipeline connectivity from Dobhi (Bihar) to Durgapur (West Bengal), including 120 km line to Jamshedpur (Jharkhand). With these awards, major contracts for phase two of the Jagdishpur-Haldia and Bokaro-Dhamra natural gas pipeline (JHBDPL) project have



Video

Current Issue

Opinion

Facebook    Twitter    Google Plus    Linkedin    Subscribe Newsletter

Twitter