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Corruption, uncertain policies remain key concerns on India: Moody

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Fiscal consolidation and moderate inflation are definite pluses for India, but graft, uncertain policies and their weak execution remain key constraints, according to Moody’s Investors Service.

In an e-mail interview with IANS, Marie Diron, senior vice president for the Sovereign Risk Group, said the agency’s assessment of India is based on its own evaluation, as also that of the World Bank on government’s effectiveness, rule of law and inflation control. This is what she said:

“India’s score are in the moderate range, reflecting checks and balances between the executive, legislature and judiciary, and increasing fiscal and monetary policy transparency,” she said.

“However, corruption, policy uncertainties and slow implementation have constrained our assessment of India’s institutional strength.”

Moody’s also expected fiscal consolidation to be gradual — as a result of specific measures on which a consensus can be reached, rather than broad-ranging fiscal strategies. So high levels of government debt, at around 65 percent of GDP, will continue to be a constraint on India’s rating.

“Besides the implications of fiscal policy for the government debt burden, the broad macroeconomic policy context has become more favourable to sustain growth. The government’s repeated commitment to fiscal consolidation contributes to maintaining inflation at moderate level.”

On the external sector, Diron said the impact on India of China’s rebalancing, the general and economic developments there will be mainly indirect. This because the share of India’s exports to China is much lower — around 3.7 percent — than for some other economies in the region.

“As a result, India would be affected by a slowdown in Chinese demand mainly to the extent that the global economy would be affected. Moreover, if such a slowdown were to lead to renewed falls in commodity prices, India as an importer of commodities would benefit,” Diron said.

“Further, China’s rebalancing may contribute to global volatility in capital flows. However, with narrower current account deficit financed by foreign direct investment, India is less vulnerable to a shift in investor sentiment and global capital flows than it would have been few years ago.”

Related article:Economic conditions of India remains weaker than peers: Moody

Diron’s assessment comes against the backdrop of the caution by Moody’s Investors Service that a prolonged worsening in asset quality of state-run banks was the main threat to India’s sovereign credit profile, while suggesting that the government must recapitalise them with more money.

Moody’s, which has given for India a credit rating at ‘Baa3’ — or just a level above the junk category — had said on Wednesday that it would consider a rating upgrade after 12-18 months, depending on improvement in macroeconomic parameters in India.

Nonetheless, its outlook on the country remained positive.

“Our positive outlook on India’s rating is based on our expectations of continued but gradual policy efforts to reduce the sovereign risks posed by high fiscal deficits, volatile inflation and weak bank balance sheets.” (IANS)

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  • Shubhi Mangla

    India has gifted the world with best mathematicians like Srinivasa and Aryabhata

  • Pritam Go Green

    Caste based reservation system is the main culprit of corruption in INDIA

    • Pashchiema Bhatia

      mainly because of the politicians who consider it as a vote bank

      • Pritam Go Green

        Mainly in North Eastern India ..where literacy rate is not up to the mark ,political leaders mislead those innocent people in the name of development promises.
        All this needs to be eradicated fast if India wants to be a developed nation.

  • Shubhi Mangla

    India has gifted the world with best mathematicians like Srinivasa and Aryabhata

  • Pritam Go Green

    Caste based reservation system is the main culprit of corruption in INDIA

    • Pashchiema Bhatia

      mainly because of the politicians who consider it as a vote bank

      • Pritam Go Green

        Mainly in North Eastern India ..where literacy rate is not up to the mark ,political leaders mislead those innocent people in the name of development promises.
        All this needs to be eradicated fast if India wants to be a developed nation.

Next Story

All You Need To Know About India’s Strategic Chabahar Port

The Chabahar Port is a seaport in Chabahar, which is on the Gulf of Oman, near Iran-Pakistan border.

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Chabahar Port is of great international significance in terms of trade, especially for India. Wikimedia Commons
Chabahar Port is of great international significance in terms of trade, especially for India. Wikimedia Commons

By Ruchika Verma

  • The Chabahar Port is of great strategic importance for India
  • It is in Iran and is being built and operated by India
  • This port will increase India’s trade with Central Asia and Europe

The Chabahar Port is a seaport in Chabahar, which is on the Gulf of Oman, near Iran-Pakistan border. Chabahar is the trans-shipment and logistics hub for the Makran Coast and Baluchistan province of Iran.

Chabahar Port is built and operated by India. Wikimedia Commons
Chabahar Port is built and operated by India. Wikimedia Commons

The tension between India and Pakistan is nothing new. There are several instances where both the countries have tried to obstruct each other’s political or economic agendas. This obstruction, along with other strategic reasons, resulted in the India and Iran’s deal on the Chabahar Port, which is crucial because of several reasons.

Here are few things about it you may not have known before :

  • Under the Trilateral Transit and Transport Agreement of 2016, the Chabahar port is the gateway to the Transport Corridor between India, Iran and Afghanistan, which allows multi-modal goods’ and passengers’ transport.

Also Read: India and Iran sign agreement to develop Chabahar Port

  • The agreement also states that India will develop and operate two berths in the first phase of the port. The contract is for 10 years and extendable. This time period excludes the first two years as they will be used for construction.
Chabahar Port will make India's trade with Afghanistan easier. Wikimedia Commons
Chabahar Port will make India’s trade with Afghanistan easier. Wikimedia Commons
  • The Chabahar Port’s first phase, which was developed by India, and inaugurated by Iran on 4th December 2017, is of great strategic importance as it makes it easier for India to conduct trade with Central Asia and Europe.
  • Iran’s Chabahar port is also important for India’s trade because of Pakistan’s reluctance in allowing India to send goods to Iran and Afghanistan through its land territory.

Also Read: Gwadar Port: China Turning Pakistan Port Into Regional Giant 

  • The development of Chabahar Port will increase the momentum of the International North-South Transport Corridor whose signatories include India, Afghanistan and Russia. Iran is the key gateway in this project. It will improve India’s trade with Central Asia as well as Europe.
    The Chabahar Port has also reduced Afghanistan’s dependence on the transit road, which went through Karachi. Now, trade can be conducted via Chabahar Port too. Islamabad has accused India of trying to use this development as a means to destabilise Pakistan.

    The Chabar Port is the said to be the counter to the Gwadar Port. Wikimedia Commons
    The Chabar Port is the said to be the counter to the Gwadar Port. Wikimedia Commons
  • The Chabahar Port also acts as a counter to the barely 100 km away, Gwadar port in Pakistan, which is developed by China. However, Iran has defended that Chabahar is not a rival to Gwadar and Pakistan is invited to join in its development.
  • In October 2017, India sent its first shipment of wheat to through Chabahar to Afghanistan, in order to test the viability of the route.
  • India will also construct a 900-km Chabahar-Zahedan-hajigak railway line that will connect Port of Chabahar to Hajigak in Afghanistan. It will also connect Mashad in the north, providing access to Turkmenistan as well as northern Afghanistan.This project is worth $1.6 billion.

    India will supply $400 million worth of steel rails to Tehrain. Wikimedia Commons
    India will supply $400 million worth of steel rails to Tehran. Wikimedia Commons
  • It is being said that India will supply $400 million of steel rails to Tehran. There are also possibilities of setting up a fertilizer plant through a joint venture with the Iranian government.