US based Credit rating agency Moody has declined to budge Indian pressure to upgrade the country’s credit rating, Reuters reported. The agency has expressed concerns over the country’s debt levels and fragile banks as the reason for its rating.
Winning a better credit rating on India's sovereign debt would have been a much-needed endorsement of Prime Minister Narendra Modi's economic stewardship, helping to attract foreign investment and accelerate growth.
Despite attempting to woo investors the Modi government failed get upgraded ratings from any of the major credit rating agencies.
Reuters reports that the correspondence between India's finance ministry and Moody's shows 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.
In letters and emails written in October, the finance ministry questioned Moody's credit rating methodology, saying it was not accounting for a steady decline in the India's debt burden in recent years. It said the agency ignored countries' levels of development
But the credit rating agency rejected these claims. They said India's debt situation was not as rosy as the government maintained and its banks were a cause for concern, the correspondence seen by Reuters showed.
Arvind Mayaram, a former chief finance ministry official, called the government's approach "completely unusual".
"There was no way pressure could be put on rating agencies," Mayaram told Reuters. "It's not done."
India has been the world's fastest growing major economy over the past two years, but that rapid expansion has done little to broaden the government's revenue base.
At nearly 21 percent of gross domestic product (GDP), India's revenues are lower than the 27.1 percent median for Baa-rated countries. India is rated at Baa3 by Moody's, the agency's lowest notch for debt considered investment grade.
A higher rating would signify to bond investors that India was more creditworthy and help to lower its borrowing costs.
While India's debt-to-GDP ratio has dropped to 66.7 percent from 79.5 percent in 2004-05, interest payments absorb more than a fifth of government revenues.