Moody’s maintains rating on India grappling with demonetisation

New Delhi, Nov 17 (IANS) With US credit rating agency Moody’s making no change to its long-term sovereign credit ratings on India, which is currently grappling with demonetisation fallout, the government on Thursday announced a set of decisions aimed at ensuring smooth sowing season ahead.

Farmers have been given permission to withdraw up to Rs 25,000 per week and registered agri-traders Rs 50,00 per week from their bank accounts. Besides, for families that have a wedding coming up, one member of the household can withdraw up to Rs 250,000 one time.

Moody’s on Wednesday said it was maintaining the “positive” sovereign credit rating of India without any upgrade — the second agency to do so after Standard and Poor’s.

The agency said the government’s reform efforts have not achieved the conditions that would support an upgrade, in particular, in accelerating private investment which would support high, stable growth. Without it, the government’s debt burden — a key constraint on the rating — is likely to remain high for a sustained period.

Introduction of the pan-India Goods and Services Tax (GST) has a major bearing on India’s ratings, and with opposition parties taking on the government on its demonetisation, the move has placed a question mark on the future of the proposed tax.

In the World Bank’s Doing Business 2017 report released late October, India’s rank remained unchanged vis-a-vis last year’s original ranking of 130 among the 190 economies assessed on various parameters.

With last year’s ranking, however, being revised to 131, India has, effectively, improved its place by one spot for 2017.

India, thus, continues to rank 130th, recording little or no improvement in dealing with construction permits, getting credit, among other parameters.

Reacting to the latest report, the Indian government has expressed disappointment, saying the World Bank had not taken into consideration 12 key reforms undertaken by India.

“We will continue engagement with the World Bank and address their concerns to include these reforms in the next year’s Doing Business report,” Department of Industrial Policy and Promotion (DIPP) Secretary Ramesh Abhishek told reporters here.

He said a dozen important reforms like enactment of bankruptcy code, GST and introduction of single window system for building plan approvals were not “recognised by the World Bank this year”.

On Wednesday, the Indian equity markets closed on a flat note due to prevailing anxiety over the impact of demonetisation, foreign fund outflows and negative global cues.

Meanwhile, international consulting firm Deloitte has said in a report that demonetisation of Rs 500 and Rs 1,000 currency notes will hurt agriculture and informal sector workers and disrupt India’s consumption patterns for at least the next quarter.

Instead, sectors like e-commerce, payment banks and payment gateways will gain as the volume of transactions using cashless methods will increase in the coming months, it said.

“Domestically, there could be some turmoil as the effect will be disproportionately felt by the lower and upper income classes,” the report said.