MOODY’S CHANGE RATING: BUT A LONG DUE, WHAT IS NEXT? CHANGE BUT A LONG IS NEXT?.”

: Any decision of the government does widely affect an economy because these decisions are affecting the sentiments of a local investor as well as a foreign investor. The economic and structural reforms to boost the growth of the country were taken by the Indian government from last many years. This is the result of institutionalized reforms, that MOODY’S INVESTOR SERVICE upgrades the rating of Indian sovereign bond from Baa3 to Baa2. MOODY'S also changed the outlook of the Indian economy from positive to stable. The rating agency doesn’t upgrade rating of any economy merely some step those are beneficial for a nation in short-term, but rating agency keeps in mind such measure of government that will benefit the economy for a long time. Last time Moody’s upgrade Indian rating in 2004. The current upgrade comes after 13 years. So, it is a long overdue. This research paper is based on a conceptual study. Secondary data is used in this paper and the data is collected from newspapers, magazines, and internet. In this research paper, I investigate, why Moody’s take a long time? And what is next step for the government to maintain or further upgrade the rating of India?


Introduction
Upgrading of rating by any rating agency is playing an important role in the economy because this (upgrade or downgrade) defines the climate of an economy for not only investment purpose but business purpose also. The rating has done by global rating agency like Moody's, Standard & Poor's and Fitch. Recently Moody's upgrade rating of Indian sovereign bond. The rating agencies follow a process for upgrading or downgrading the rating of any country. The Government of any country invites the rating agency to give the rating to their economy. The credit rating agency evaluates the economic as well as the political environment of the nation than give the rating to the country. Rating is helping the countries for getting fund from the international market. So the government makes continuous efforts to impress the credit rating agency for upgrade the rating of the economy.
The Government of India also takes a lot of economic and institutional reforms to upgrade the rating of the country. This is the result of these economic and structural reforms that credit rating agency Moody's upgraded the rating of India. It is upgraded from Baa3 to Baa2. Beside it, Moody's also upgrade outlook of the Indian economy from positive to stable.

Objective
In this paper, I explain upgraded rating of India's by Moody

Research Methodology
This research paper is based on a conceptual study. Secondary data is used in this paper and the data is collected from newspapers, magazines, and internet. For grading or rating, any country Moody's consider the different condition or situation those are prevailing in the economy. Which include:

History of Moody's Upgrade of Indian Rating
1) The macroeconomic variable of the economy: like GDP Growth, Inflation etc.
2) GDP to Debt ratio.
3) Forex reserve (Foreign exchange reserve) of the country. 4) Leakage of subsidy (not reach the subsidy to target customer). 5) Government decision related to the long-term benefit of the economy. 6) Fiscal deficit consolidation of the central government as well as state government.

Moody's Rating and Indian Scenario
When a rating agency gives rating to any country then, rating agency keeps in mind such measure of government that will benefit the economy for a long time. The government of India also take a lot of decisions which is affecting (positively) the Indian economy in long-term. In India many factors those are affecting the economy in long-term which are

Political Stability
When we are looking in around the world, in many places (countries) have political instability. But in India have political stability. Its impact on the economy in a long time.

Forex Reserve
The forex reserve is an important tool for any country because it settled the Balance of Payment and financial crisis of the country. India's forex reserve has been continuing increase and now it is cross $ 400 billion.

GDP To Debt Ratio
Moody's also consider the debt burden on the government to the ratio of GDP. India's GDP to Debt ratio continuously decreases.

Fiscal Deficit
The government of India reduces its fiscal deficit year to year. When we saw previous year's performance of government, it is targeting the fiscal deficit and achieve it. In 2015-16 target was 3.9% of GDP, in 2016-17 it was 3.5% of GDP and in the current year, the target is 3.2% of GDP. The target of fiscal deficit of government is 3.0% of GDP by 2019.

Why Moody's take A Long Time?
Last time Moody's upgraded India's rating in 2004 from Baa1 to Baa3. Now it is upgraded after 13 years. Here's some reason why Moody's took so much time to upgrading the Indian rating: Any rating agency keeps in view the long-term benefit of the economy from the government decision. The average growth of the Indian economy is about 8% from 2004 to 2010. But the rating agency does not upgrade the rating of India, because 1) The fiscal deficit on those years (2004 to 2010) was so high. it is about 8% to 9% of GDP (as per finance ministry data). The rating agency also holds the fiscal deficit of the central government as well as the fiscal deficit of the state government. On those days the fiscal deficit of both the central government and state government was very high. 2) When our GDP Growth was 8% to 9% then the inflation was also very high.
3) The ratio of debt to GDP was also high. It was 78% to 80% in those years. Therefore, a huge amount paid in the form of interest. 4) Different scams also emerged, hence rating agency did not improve the rating of India's. 5) The recession of 2008 affected the whole world together. Due to this recession, the global condition for the business & investment was badly affected. It was also a reason that Moody's hold off the rating of India. 6) In the last decade, the coalition government in the country was also an obstacle to upgrading the rating.
When Moody's upgrade Indian rating, then around the country have one noise that ``IT IS LONG OVERDUE''. But we can say that "BETTER LATE THAN NEVER." Because worth (value) of this upgrade is more important for India.

What Is Immediate Impact of This Upgrade For Indian Economy
When Moody's upgrade the rating of India. It is welcome by all economist as well as an investor. The very next day the index of the stock market is increase. The rupee also appreciated against the US dollar. The yield on the government bond (10 years maturity) is also affected it is reduced. It has many immediate impacts on the economy like:  Boost the positive sentiment on the investor.  The cost of capital will be reduced.  Fund borrowing from abroad of large companies become cheaper and easy.  Saving of households will be increase. And it will helps in private investment.  Increase in saving rate help for restart the investment cycle of the private sector.  Debt burden on government will be also reduced because more fund comes from abroad.  Moody's also upgraded the rating of the banking sector in India. It is helpful in fighting against the problem of non-performing assets.  Indian rupee appreciates against the global currencies because more fund comes from abroad will increase the demand for the Indian rupee.  In India, large parts of oils demand met by imported oil or we can say ours import bill is more than ours export bill. Thus, a large amount of money has to be paid in the form of payment of these bills. So, if the Indian rupee will be appreciated than automatically the import bills of India become low.

What Does The Government to Further Improve/Sustain This Rating
This upgrade was belated because it comes after 13th years. This does not mean that the government did not take reform step for the economy. In the last decade government also take a lot of decision-related to the economic growth. But Moody's doesn't upgrade the rating of India because rating agency considers the long-time benefit related to the economy.
But we are expecting that this rating sustains in long-time or Indian rating further improve. Thus, some matters related to the economy are solicitousness:

Fiscal Deficit
The fiscal deficit of India's is the major problem of government because every year our budget is in deficit. So, it is the suggestion that the next budget doesn't make more populist.

GDP to Debt Ratio
It is the welcome thing that the government reduces the GDP to Debt ratio in previous years. Now it is 68% of GDP but it not well because 44% GDP is the efficiency ratio. So, the government takes more step towards reducing it continuously.

Non-Performing Assets
Non-performing assets of the bank in India is a major problem. The government also injected to the bank for this problem like recapitalization of the bank. But this problem is so serious because the loan of farmer waiver, loan of businessman those are not recovered by the bank are continue increase. So, the government need take some more decision to fight against this problem.

Ease of Doing Business
In the current year the raking of India in ease of doing business is improving. Now India at 100th rank (world bank report). But we are far below from target those are set by the government. So, the government needs to improve the business climate in the country.

Make Gst Simpler
The government needs to make simple the Goods and Service Tax (GST).

Corporate Tax
In India, the rate of corporate tax is so high compared to other countries. It is no doubt that government takes step towards this (corporate tax) in last budget. But it is the suggestion to the government that the tax on corporate sector reduces continue at significance level.

Insolvency Code
The Insolvency and the Bankruptcy Code (IBC) implement soon. Not only make continue this type of law but timely amended these laws so important.

State Contribution
The rating agency doesn't consider only the central government policy but also the policy of state government like the policy related to agriculture. So, the state has to make policy or laws according to policy or laws of central government.

Sustainable Growth
The government has to the sustainable growth of GDP, Investment sector, Employment sector etc.

Conclusion
From above, I investigate that this upgrade quite late but it comes it is more important for us. In this research paper we have two questions that are:  Belated upgrading  Government solicitousness in future for sustain or further upgrade.
And we are also finding the solution to the above problem. The answer to the first problem is: in those years we have absolutely growth of the economy. In many years our GDP growth was about 8% to 10% but we have huge fiscal deficit also. And the inflation rate on those years was very high.
Secondly, I investigate some warm to the government for sustain or further upgrade this rating. It is no doubt that any rating agency considers the long-term positive/negative effect on the economy, as well as the rating agency, also consider the state contribution in the economy. In previous years the fiscal consolidation path of the central government is acceptable, but the fiscal deficit of state is increasing continuously. So, it becomes important for state government that reduces its fiscal deficit. So, we can say that "BETTER LATE THAN NEVER".