At a time when Moody’s downgraded the country’s rating, Chief Economic Advisor Krishnamurthy Subramanian on Thursday said India’s fundamentals demand a much better rating.
Subramanian also said the Finance Ministry was working on a large range of growth estimates for this year and a recovery in the second half or next year was also part of baseline expectation.
“It is uncertain if the recovery will happen in the second half of this year or next year. We keep all options under consideration and will be evaluating them,” PTI quoted Subramanian as saying.
The Chief Economic Advisor also said the Finance Ministry had evaluated pros and cons of options such as deficit monetisation.
With most experts predicting a contraction in the current financial year, Subramanian said, “Economic growth will depend on when recovery happens. It is uncertain if the recovery will happen in the second half of this year or next year.”
On the other hand, Subramanian took comfort in rating agencies acknowledging India’s reforms, saying these were critical elements for higher growth next year. He said that the country’s ability and willingness to repay is gold standard.
Last week, Moody’s Investors Service downgraded India’s sovereign rating to ‘Baa3’ from ‘Baa2’, saying there would be challenges in implementation of policies to mitigate risks of a sustained period of low growth and deteriorating fiscal position.
Meanwhile, S&P Global Ratings affirmed its ratings on the country’s long-term foreign and local currency sovereign credit at lowest investment grade and maintained a stable outlook, arguing that “India’s economy is likely to achieve a strong recovery following the deep contraction in this fiscal year; forecasting real GDP growth at 8.5 per cent” in FY22.
Subramanian said that banking will be part of the strategic sector for privatisation and added that the government is working to identify strategic and non-strategic sectors.
– with PTI inputs
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