Ace investor Rakesh Jhunjhunwala affirmed faith in Narendra Modi government's reforms process on Friday and said reforms such as Swach Bharat Mission, Make in India, Goods and Services Tax (GST) and Ease of Doing Business among other measures will put Indian economy into a high-growth trajectory, adding the effects of reforms process will be felt during the next two-three years.
Jhunjhunwala sees India's economic growth risng to double digits post 2020 on Modi government's reforms.
Moody's sovereign upgrade will allow Indian firms to raise funds at lower rates from overseas and the upgrade will enable huge flows of foreign capital into the Indian market, Jhunjhunwala told a business news channel.
On Sensex, Nifty rising over 1 percent higher in early trade, Jhunjhunwala who has been bullish on Modi government's reforms process said this is the start of the long-awaited bull market.
Moody's Investors Services on Friday lifted India's local and foreign currency debt ratings, saying that continued progress on economic and institutional reform will enhance India's high growth potential. The ratings agency said it was lifting India's rating to Baa2 from Baa3 and changed its rating outlook to stable from positive, saying that at the Baa2 level risks to India's credit profile were broadly balanced.
Moody's said the recently-introduced goods and services tax (GST), a landmark reform that turned 29 states into a single customs union for the first time, will boost productivity by removing barriers to interstate trade.
Moody's noted that while a number of key reforms remain at the design phase, it believes those already implemented will advance the government's objective of improving the business climate, enhancing productivity and stimulating investment. "Longer term, India's growth potential is significantly higher than most other Baa-rated sovereigns," said Moody's.
The agency said challenges from implementation of the GST, ongoing weakness in private sector investment, slow progress with resolution of banking sector asset quality issues, and lack of progress in land and labour reform remained key issues.
The bank recapitalization plan and a push to resolve its bad loans issue by reforming the bankruptcy code were beginning to address a key weakness in India's sovereign credit profile, said Moody's.
The government last month announced a $32 billion recapitalisation of state lenders to help resolve non-performing loans (NPLs) and kick-start lending growth. "While the capital injection will modestly increase the government's debt burden in the near term, it should enable banks to move forward with the resolution of NPLs," said Moody's.