New Delhi: Finance Minister Arun Jaitley on Friday termed Moody's upgrading India's sovereign rating after 13 years as "belated recognition" of reforms undertaken, saying that the reform agenda will continue with emphasis on higher spending on infrastructure and in rural areas.
He vowed to maintain the fiscal discipline, stating that the government "intends to stay the course on fiscal consolidation in the medium term".
Moody's Investors Service today upgraded India's local and foreign currency issuer ratings to Baa2 from Baa3 and changed the outlook on the rating to stable from positive. The upgrade came after 13 years.
India's sovereign credit rating was last upgraded in January 2004 to Baa3 (from Ba1). 'Baa3' was the lowest rating in the investment grade -- just a notch above the 'junk' status.
"We welcome (the upgrade) and believe that it is a belated recognition of all the positive steps taken in India in the last few years which have contributed to the strengthening of the Indian economy," he told reporters here.
The upgrade recognises major economic and institutional reforms undertaken by the government, he said.
Some of the reforms he listed included the Goods and Services Tax (GST), putting in place a sound monetary policy framework, recapitalisation of public sector banks, demonetisation and use of Aadhaar to bring formalisation and digitalisation in the economy.
Asked what would be the next reform thrust, Jaitley said the important emphasis now would also be implementation as well as reaping benefits. Emphasis would be on infrastructure building and spending in rural areas, he said, adding that FII inflows are already positive and would continue to remain so after the rating upgrade.
Refusing to link the rating upgrade with political mileage that his party, BJP, may get in assembly elections in Gujarat and Himachal Pradesh, he said stable reforms will not be possible if only election oriented decisions are taken.
On GST, he said rationalisation of tax rates is gradually underway and will benefit businesses. The rates are lower than those prevailing before the new indirect tax regime was introduced in July, he added.
Asked if the government would stick to the path of fiscal consolidation, Jaitley said: "Our track record for the past three years speaks for itself. And we intend to continue to be on that track. "If you look at our track record of 3 years, it has been one of the better records in Indian history as far as fiscal discipline is concerned. And we intend to move on that track."
A statement by the finance ministry said the rating upgrade recognises India's commitment to macro stability which has led to low inflation, declining deficit and prudent external balance.
It said that it also reflects on the government's fiscal consolidation programme which has resulted in reduction of the deficit from 4.5 per cent of the GDP in 2013-14 to 3.5 per cent in 2016-17 and its consequential sobering impact on general government debt. Jaitley said the GST itself has been universally regarded as landmark reform in tax structure.
He said: "It is extremely encouraging that there is an international recognition (of reforms) and the fact that this recognition merely furthers our determination to follow the track we have embarked upon."
The upgrade has not happened in isolation and for the last three years the India has been the fastest growing major economy, he added.
"And after a long spell of 13 years, India gets the rating upgrade. I am sure that many who had doubts would now seriously introspect on their own positions," he said in a jibe at critics of his government's reforms programme.
