Not sure if Indian economy has bottomed out: Moodys

NEW DELHI: A research unit of the ratings agency Moody's has said it was not sure if the Indian economy had bottomed out, and blamed the slowdown in investments on a 'disturbing antibusiness tinge' of the government. "The days of 8% annual GDP growth in India are long gone," Glenn Levine, SeniorEconomist, Moody's Analytics said in a note on Wednesday pegging the growth in the first half of 2013 at 5%-6%. "India's growth rate has been steadily slowing for the past two years, and it is not yet clear whether the bottom has been reached," the report said taking a stand against the consensus that Indian economy reached its lowest in October-December quarter. Interestingly, unlike Fitch and Standard & Poor's, Moody's has a stable outlook on India's sovereign rating. The report 'India Outlook: The Restraints on Growth' notes that India will return to its potential growth rate only in 2014 and that potential rate of growth was 7% and not 8%. The government expects the economy to grow 6.1%-6.7% in the current financial year, a sharp rebound from likely 5% GDP growth last fiscal. "The economic reforms through the second half of 2012, coupled with lower interest rates, should lift India's growth pace through the second half of 2013, but it will be some time before the economy expands at its potential rate," the report said adding that consumer spending had stalled. "Fixed investment, which includes public and private expenditure, grew 1% in 2012 as both local and foreign investors curtailed operations. This was largely in response to actions of the government that revealed a disturbing antibusiness tinge before Prime Minister Singh's new economic team began to turn things around late last year," report noted. It lauded the efforts to cut the budget deficit and opening of retail and aviation sectors to foreign investors, but wondered if they are enough to lift investment sentiment. "Red tape remains the biggest obstacle to investment. Yet it is too entrenched at all levels of

bureaucracy to tackle in an expedient way," the report said, questioning the impact the cabinet committee on investments can have in reviving sentiment. "The veil around the economy has been lifted, and investors are no longer willing to invest there on any available terms. Foreign capital will return only if the government implements lasting economic reform. We see few signs that this is possible," it said.

Finance Minister P Chidambaram slams S&P for not upgrading outlook

By ET Bureau | 21 May, 2013, 05.12AM IST

Finance Minister P Chidambaram slams S&P for not upgrading outlook

ET SPECIAL:
Get latest Dollar price updates on your mobile

NEW DELHI: Union Finance Minister P Chidambaram on Monday expressed unhappiness with ratings agency Standard & Poor's (S&P) reiteration of a negative outlook on India, saying the country deserved an outlook upgrade given the improvement in the macroeconomic situation. Chidambaram also said the government could take more measures to curb goldimports if they did not slow down. He appealed to the people of India to curb their passion for gold in national interest. "Our case (to S&P) is that we deserve an upgrade both on the outlook and the rating. S&P may not have been convinced about that...," the minister told reporters on the sidelines of the annual day function of the Competition Commission of India (CCI).

On Friday, S&P reaffirmed its 'negative' outlook on India's BBB- sovereign rating with a one in-three chance of a downgrade over the next 12 months. A downgrade could take India's sovereign rating to below investment or junk grade, which would make foreign borrowings for Indian companies costlier, depress capital flows and weaken the currency. "There is nothing to worry. Our macroeconomic position today is much better than what it was in August 2012 (when Chidambaram took over)," the finance minister said. Chief Economic Advisor Raghuram Rajan and Economic Affairs Secretary Arvind Mayaram, who had argued for an upgrade last month in interactions with the ratings agency, had already expressed their displeasure. On the issue of high current account deficits, Chidambaram added that it was necessary to curb gold imports. Gold and silver imports shot up 138% in April. "At our instance, RBI has now instructed banks that they should not import gold or offer gold except to jewellers for export. Some more steps if necessary would have to be taken," he said. The spike in gold imports has increased the pressure on the country's trade and current account deficits, and limited the scope for monetary easing by RBI despite a recent slowdown in inflation. The finance minister also made a case for merging of public sector banks, saying the country needed two or three large size banks to cater to the economy. "...some banks, including some of the 26 public sector banks that we have, may be better off merging," Chidambaram said while taking about sectors that need restructuring. "The need for two or three world-size banks in an economy that is poised to become one among the five largest in the world is rather obvious," he said.

S&P's negative outlook on India unfortunate: India Inc

Expressing surprise over S&P's threat to downgrade India's credit rating, India Inc termed the agency's affirming its negative outlook on the country as unfortunate and harsh

ET SPECIAL:
Get latest Dollar price updates on your mobile

NEW DELHI: Expressing surprise over S&P's threat to downgrade India's credit rating, industry bodies today termed the global agency's affirming its negative outlook on the country as unfortunate and harsh. Standard & Poor's (S&P) has warned that it may downgrade India's sovereign rating to junk grade if the government fails to pursue reforms and check deterioration in fiscal and CAD. "S&P's warning of downgrading India to junk status has come as a surprise. At this juncture when signs of improvement are on the horizon, there is a high likeliness that the problems would soon be tackled," industry chamber Ficci said. It said the set of macro data released recently gives clear indications of return in buoyancy in the economy. Another leading chamber CII said the negative outlook affirmation by S&P for India's BBB-status is "unfortunate". While retaining India's sovereign rating at 'BBB-' with a negative outlook, S&P said there is at least a one-in-three likelihood of a downgrade within the next 12 months. CII said that over the last eight months a number of measures have been taken by the government through the Parliamentary system and also through notifications, which have clear directional value in terms of reforms.

"In the light of that, the rating by S&P appears to be harsh on India," it added. CII said the chamber is confident that the government would do everything necessary to bring current account deficit and fiscal deficit under control. Meanwhile, Ficci also said that moving on a higher growth path remains the central agenda of the government and the aspiration to realise this looks strong.