India's improved political setting offers a conducive environment for reforms, which could boost growth prospects and improve fiscal management, the ratings agency while revising upwards the country's outlook
Ratings agency Standard & Poor's (S&P) on Friday raised its outlook on India to 'stable' from 'negative' with 'BBB-minus' rating reflecting its views that the country's improved political setting offers a conducive environment for reforms, which could boost growth prospects and improve fiscal management.
"The stable outlook for the next 24 months reflects our view that the new government has both the willingness and capacity to implement reforms necessary to restore some of India's lost growth potential, consolidate its fiscal accounts, and permit the Reserve Bank of India (RBI) to carry out effective monetary policy," S&P said in a release.
The ratings agency had cut India's rating to "negative" in April 2012, and that came to symbolise the plummeting investor confidence in India because of corruption cases and the lack of action by the then Congress-led government.
Talking about its ratings on India, S&P said, it reflects the country's strong external profile, combined with its democratic institutions and free press, both of which underpin policy stability and predictability. These strengths are balanced against the vulnerabilities stemming from the country's low per capita income and weak public finances.
India's external position is a key credit strength. The country has relatively little external debt and a much improved external liquidity position. S&P said, "We project that, at the fiscal year end of March 31, 2015, external debt net of external assets will be 6% of current account receipts (CARs). Central bank reserves well exceed public sector external debt, reflecting the public sector's ability to finance practically all of its borrowing requirement domestically. On a broader definition, India's net external liabilities are a low 49% of CARs based on our projections at the end of the current fiscal year in March 2015, and nearly half of gross external liabilities consist of inbound foreign direct investments."
According to the ratings agency, India's current account has improved in recent years after restrictions on gold imports and slower domestic investment demand. At the same time, the central bank rebuilt its foreign currency reserves to cover about 5.5 months of current account payments. Although we expect the current account deficit to widen from its current low of 1.8% of GDP (as of March 2014) as investment picks up, gross external financing needs are likely to remain at or below the sum of CARs plus usable reserves in the next two to three years, it added.
"India's well-entrenched democratic political system is another credit support," S&P said, adding, "that, along with the country's mature and stable institutions (including free press) and system of checks and balances, has afforded India a long period of stability. Although the paralysing effect of legislative gridlock can blunt government effectiveness, our outlook revision indicates that we believe the current government's strong mandate will enable it to implement many of its administrative, fiscal, and economic reforms."
"We expect the new administration to adhere to its stated fiscal consolidation program, even though we acknowledge that planned revenues may not fully materialize and subsidy cuts may be delayed. We expect improved fiscal performance in the medium term primarily from revenue-side improvements brought about by the planned introduction of a national goods and services tax (GST) and administrative efforts to expand the tax base. We project net general government debt to decline to below 60% of GDP by the year ending March 2018, and with it, general government interest rate expense to just under 20% of revenues. A faster pace of deficit and debt reduction is unlikely in our view. Hence, we believe fiscal and debt metrics are set to remain key rating constraints for some time," S&P added.
The complaint filed by American Justice Center charges Modi with committing crimes against humanity, extra-judicial killings, torture and inflicting mental and physical trauma on the victims
A Court in the US has issued a summons against Indian Prime Minister Narendra Modi, who is visiting that country. The summons is issued for Modi's alleged role in the 2002 communal violence in Gujarat when he was the state's chief minister.
The summons against Modi were issued on Thursday by the US Federal Court for the Southern District of New York following a lawsuit filed by the New York-based American Justice Center (AJC), a non-profit human rights organisation, along with two survivors of the violence.
Modi is scheduled to arrive in New York today on his maiden US visit as prime minister.
During his five-day visit, Modi would address the annual UN General Assembly, the Indian-American community at Madison Square Garden in New York, and then travel to Washington to meet President Barack Obama on September 29 and 30.
Groups known for their anti-India activities have planned a series of demonstrations against him in both New York and Washington.
The lawsuit against Modi has been filed under the Alien Tort Claims Act (ATCA) and the Torture Victim Protection Act (TVPA).
Seeking compensatory and punitive damages, the 28-page complaint charges Modi with committing crimes against humanity, extra-judicial killings, torture and inflicting mental and physical trauma on the victims, mostly from the Muslim community.
"The Tort Case against Prime Minister Modi is an unequivocal message to human rights abusers everywhere," said John Bradley, director at the AJC.
"Time and place and the trappings of power will not be an impediment to justice," he said.
The Alien Tort Claims Act, also known as Alien Tort Statute (ATS), is a US federal law first adopted in 1789 that gives the federal courts jurisdiction to hear lawsuits filed by US residents for acts committed in violation of international law outside the US.
Reacting to the lawsuit in New Delhi, Law Minister Ravi Shankar Prasad today said the government will examine the reported summons issued by the US court against Modi.
"We will examine it. I don't know it. I am only hearing it from you. We will examine it," Prasad told reporters in New York.
While the 'Make in India' campaign is a step in the right direction, it will have to be followed up by more tangible measures such as building ports, highways and increasing power generation says Nomura
Prime Minister Narendra Modi Thursday unveiled the 'Make in India' campaign. Under the campaign the government aims to increase the growth rate in the manufacturing sector in India to 10% compared with -0.1% in FY14 and raise its share to 25% in the overall GDP.
However, according to Nomura, success of such campaigns also depends on other factors such as availability of quality physical infrastructure and skilled manpower. "Thus, while the 'Make in India' campaign is a step in the right direction, it will have to be followed up by more tangible measures such as building ports, highways, increasing power generation and so on, to make India a manufacturing hub," it said in a research note.
Nomura said, from a broader perspective, the 'Make in India' campaign again highlights that the Modi government will focus on streamlining governance in India and building investor confidence to increase investments and boost growth in India. "While big reforms such as implementation of nationwide good and services tax will happen overtime, small changes at the micro level can provide the immediate impetus to put the economy back on high growth trajectory, in our view," it added.
Here are the key highlights of 'Make in India' campaign...
"Hold" investors hands, especially foreign investors.
Involve 25 government departments to streamline approval processes.
Provide time bound clearances through a single online portal.
Set up an eight member panel, called Team Invest India, to respond to investor queries within 48 hours, clarify policies to investors and suggest reforms to the Central and state governments.
Address issues in a comprehensive manner including amending labour laws,skill development, ease FDI policies and develop infrastructure.
Identified 25 sectors such as defence, pharmaceuticals, food processing, auto and auto components, electronics, where India can be a world leader