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Failure on reforms front may hamper investments
1. Failure on Reforms Front
may Hamper Investments
Moody's cautions on corporate sector facing potential headwinds
2. Contd…
International rating agency Moody's Investors Service has said potential headwinds loom
over Indian companies from a loss of reform momentum and cautioned that failure to
implement reforms could hamper investment amid weak global growth.“It seems highly
unlikely that the major reforms will get enacted by the upper house of the Indian
parliament where the ruling coalition is in minority,“ Moody's said on Wednesday .
In a note a day ahead of a potentially stormy winter session of Parliament, the credit rating
agency said, “The Modi administration so far this year has been unable to enact legislation
on key reforms, including a unified goods and services tax and the Land Acquisition Bill.“
The government is trying to reach out to the opposition to get the goods and services tax
GST) law passed, which is stuck in upper house due to opposition from Congress.
The agency said it expects India to grow 7.5% in 2016-17 but said despite overall
supportive domestic conditions the corporate sector faces potential headwinds from a loss
of re orm momentum.
3. Contd….
“A Healthy 7.5% GDP growth for India for he fiscal year ending March 2017 (FY2017) and a
pick-up in manufacturing activity will be broadly supportive of business growth,“ said Vikas
Halan, a Moody's vice president and senior credit officer. “However, the corporates remain
vulnerable to the volatile Indian rupee as against the US dollar and to low commodity
prices, which has in turn led to a sharp decline in external trade.“
Halan was speaking on the release of Moody's 2016 outlook presentation for Indian non-
financial companies.
Moody's expects non-financial companies to benefit from strong domestic growth and
accommodative monetary policy , but sees weak global growth and a potential US rate hike
a drag on their businesses.
The ratings agency has a Baa3 rating for India with a positive outlook. The fall in
commodity prices has benefited many Indian companies and the moderating inflation
should result in lower borrowing costs for corporate borrowers and yields on corporate
bonds, Moody's said while pointing out risks from loss of reforms momentum.
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