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Updated August 11th, 2018 at 12:32 IST

WATCH: Sanjeev Sanyal, Principal Economic Advisor to Finance Ministry on #MoodysBacksModi

With Moody's upgrading India's sovereign rating and giving the Modi-govt a thumbs up, Republic TV speaks to the FinMin's Principal Economic Advisor

Reported by: Ankit Prasad
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With global credit rating firm Moody's upgrading India's sovereign bond rating and giving the Modi-govt a thumbs up, Republic TV speaks to the Finance Ministry's Principal Economic Advisor, Sanjeev Sanyal.

When Sanyal was asked as to what led to the up gradation, he said that it is the cumulative effect of years of efforts. He also gave credit to the insolvency and bankruptcy code reform of the past 12 months. 

When quizzed about which are the most important reforms that led to the upgrade, Sanyal said that insolvency and bankruptcy code will be at the top. He stressed that since India is trying to become an entrepreneurial economy, there will be several risk-takers in business. An insolvency and bankruptcy code helps create an exit if anything goes wrong with the business. 

Talking about GST (Goods and Services Tax)  and the criticism surrounding it, he said that any major reform will have unintended consequences. He also added that instead of planning meticulously it is better to introduce the bill and keep it in the feedback loop and make changes to it. 

Talking about the non-economic benefit of demonetisation, he said that there has been a culture shift, with demonetisation. The economist said that India has gone from a patronage-based, rent-seeking political economy to an economy based more on rule of law, entrepreneurship, and risk-taking. 

Finally, when asked if the rates are fixed, he said that if rate could be fixed, it would have been a triple AAA country by now. 

 

The international rating agency, Moody's has upgraded India's local and foreign currency issuer from Baa3 to Baa2 after  14 years. This upgrade has given a boost to the morale of the market and the Government. in turn, giving a big boost to the morale of the market and the Government.

The 'Baa3' rating was the lowest investment grade -- just a notch above 'junk' status. However, Moody warned that the high debt burden remains a constraint on the country's credit profile. As per Moody, a number of important reforms which are at the design phase, when implemented will advance the governments'  objective of improving the business climate enhancing productivity, stimulating foreign and domestic investment, and ultimately fostering strong and sustainable growth. The global rating agency expects the GDP growth to moderate to 6.7 percent in the fiscal year ending in March 2018. 

 

 

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Published November 17th, 2017 at 16:23 IST

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