India's debt situation was not as rosy as the government said and its banks were a cause for concern, Moody's said.

Modi government tried and failed to influence Moodys for a ratings upgradePTI/file photo
news Economy Friday, December 23, 2016 - 14:37

Perhaps providing an insight into how the Modi government operated to manage its perception globally, Reuters has reported that officials of India’s finance ministry pushed aggressively for an upgrade of credit ratings, but the US-based agency refused to do so.

In its exclusive report, Reuters stated that correspondence between Indian officials and Moody's shows that New Delhi “failed to assuage the ratings agency's concerns about the cost of its debt burden and a banking sector weighed down by $136 billion in bad loans”.

The letters were reportedly written in October 2016, in which the finance ministry questioned Moody's methodology, saying it was “not accounting for a steady decline in the India's debt burden in recent years.”  The agency was accused of ignoring India’s levels of development when assessing its fiscal strength, the report said.

Moody's, however, said India's debt situation was not as rosy as the government said and its banks were a cause for concern, Reuters reported. You can read the full report here.

In August 2015, almost four months after it revised India’s outlook to ‘positive’ from ‘stable’ and set a GDP growth target of 7.5% for 2015, Moody’s revised its GDP growth projection to 7%.

Recently, Moody's said the shock ban on high-denomination currency notes will in the near term significantly disrupt economic activity and lead to weaker growth, but in the long run can boost tax revenues and translate into faster fiscal consolidation.

In September 2016, Moody’s said that it could upgrade India's rating in one-two years if it is convinced that reforms are "tangible". 

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