Impact of Economic Reforms: International ratings agencies expect smart economic recovery in India

Abhishek Dayal
There is some positive news on the economic front: reputed global rating agencies in their latest reports have taken note of the comprehensive Economic Reforms ushered in by the Indian Government in recent months and they anticipate a smart economic turn-around next year.
Fitch Ratings agency in a report said on Wednesday (June 10) that Indian economy would register a sharp growth rate of 9.5 per cent next year provided it manages to avoid further deterioration in its financial sector. While a shrinking in GDP is inevitable due to the breakdown in production and supply chains caused by Covid19 pandemic this year, further contraction is likely to be avoided as a result of careful management of the situation.
The agency has retained its investment outlook for India, pointing out that to support the economy, the Reserve Bank of India (RBI) has eased monetary policy by cutting policy rates and by providing liquidity through long-term repo operations. Prudential requirements for banks have also been eased to free up liquidity for lending. “The government has announced stimulus measures amounting to 10 per cent of GDP, of which the fiscal component of about 1 per cent of GDP is significantly less than many of India’s peers,” the rating agency said.
Global rating agency Standard & Poor’s (S&P) has also affirmed its rating on India’s long-term foreign and local currency sovereign credit, saying the country’s economy remains “a long-term outperformer versus peers at a similar level of income”.
In an interview to PTI, government’s Chief Economic Advisor Krishnamurthy Subramanian rejected the rating actions by international agencies, saying that India’s fundamentals demand a much higher investment ratings than what is being given. He was however satisfied to note that the agencies have acknowledged the path-breaking reforms that have been unleashed. He is confident of a smart recovery in the last quarter of this fiscal itself.
On March 25, Prime Minister Narendra Modi had announced a nation-wide lockdown to check the spread of Covid19. The lockdown has been extended a number of times since then, but with progressive removal of restrictions to allow economic activities to get back to normal. A massive exercise was undertaken to ensure that those migrant labourers who wished to go back, reached home safely. Farming was also allowed to operate without a break and it was ensured that the farming season was not affected. Economic support to the weakest sections was ensured through a number of schemes including direct money transfer to Jan Dhan accounts and increased work allocation in MGNREGA.
MSMEs, that form a significant part of economic landscape in many regions of the country, have also been supported with radical reforms in this sector. Deep and fundamental reforms in core and strategic sectors will ensure a faster recovery.
To be continued
The writer is Director, PIB Imphal