India Inc rebuts Moody's reports

In a blow to India, Moody's Investors Service has cut the country's credit rating outlook to negative, the first step towards a downgrade, saying the government has been partly ineffective in addressing economic weakness, leading to rising risks that the growth will remain lower.

New Delhi: India's economy possesses strong fundamentals and will revive on account of various reform measures taken by the government, said industry players on Friday after Moody's Investors Service cut the country's credit rating outlook to negative.

In a blow to India, Moody's Investors Service has cut the country's credit rating outlook to negative, the first step towards a downgrade, saying the government has been partly ineffective in addressing economic weakness, leading to rising risks that the growth will remain lower.

With its strong fundamentals, India is managing the effects of global slowdown with resolute measures in a host of sectors, besides taking up structural reforms in taxation, banking, finance, and thus change in India's ratings by Moody's Investor Service to 'negative' from 'stable' is incomplete in its assessment, said Assocham President B K Goenka.

"We in India Inc., fully share Finance Minister Nirmala Sitharaman's optimistic outlook about the Indian economy, with inflation staying low and the current account situation remaining quite strong," Goenka said.

D K Aggarwal, president of the PHD Chamber of Commerce and Industry, said the economy is set to rebound strongly in 2020 with a growth rate of over 7 per cent.

"We believe that the government has undertaken various reform measures in recent times to revive the economy which are expected to give fruitful results, going forward," said Aggarwal.

He added that significant cut in corporate tax for domestic firms will accelerate the investments in manufacturing, open up new employment opportunities and kick-start economic growth trajectory of the country.

Senior Vice-President & Economist at DBS Bank Radhika Rao said the Moody's outlook change reflects concerns over growth outlook and anticipated fiscal slippage.

"If fiscal consolidation is demonstrated through prudent spending and higher revenues through privatisation receipts, along with a wider tax base, these worries will be allayed," Rao said.

Motilal Oswal Financial Services MD & CEO Motilal Oswal said the long-term fundamentals of the Indian economy continue to remain strong with healthy growth and a domestic consumption-driven economy.

In a statement, Moody's said the outlook partly reflects government and policy ineffectiveness in addressing economic weakness, which led to an increase in debt burden which is already at high levels, the rating agency said.

India's economy grew 5 per cent between April and June, its weakest pace since 2013, as consumer demand and government spending slowed amid global trade frictions.

The government reacted strongly saying the fundamentals of the economy remain quite robust and series of reforms undertaken recently would stimulate investments. India's growth outlook has deteriorated sharply this year, with a crunch that started out in the non-banking financial institutions spreading to retail businesses, car makers, home sales and heavy industries.