India needs to improve fiscal health for ratings upgrade, says Moody's

A Moody's Investors Service analyst said the country needed to improve its fiscal position to earn a ratings upgrade and warned that even if policy action was taken now it would likely take a while for the impact to be reflected on government finances.

The government's fiscal consolidation would also need to be an improvement on similarly-rated countries, Moody's sovereign rating analyst Atsi Sheth told Reuters on Thursday.

"For a rating upgrade, the fiscal position has to improve materially or there should be evidence that it's going to improve materially not only with respect to itself, but comparable to similarly-rated countries," Sheth told Reuters in a telephonic interview, adding, "And that is still some distance away even if policy action is taken now because there is a long road to climb back up."

Moody's currently rates the country at "Baa3", the lowest investment-grade rating, with a "stable" outlook.

The Moody's analyst added the government's moves to improve the fiscal health would have a bigger impact on the country's credit than any policy action by the Reserve Bank of India.

The RBI, in a surprise move on Thursday, cut its repo rate , the interest rate at which it lends to banks, by 25 basis points to 7.75 per cent.

(Reuters)