With the massive mandate in favor of the Congress-led UPA alliance, credit rating agency Moody’s said that the ‘game-changing event’ would take the edge off the downgrade pressure on India’s sovereign ratings.

Saying that the near-decisive mandate of the general election would, in the near term, ease pressure on the economy, senior analyst Aninda Mitra - of Moody's Sovereign Risk Unit – noted that the big triumph for the Congress-led coalition “provides enormous political scope to implement policy, to implement reforms. It would offset some of the ratings pressures on account of fiscal reasons and the government’s heretofore inability to rein in its fiscal deficit.”  

However, Mitra added that there are no imperative plans for changing India’s investment-grade Baa3 foreign currency rating and Ba2 domestic currency rating. At present, India’s local currency rating trails its foreign rating by two notches owing to reasons like - a strong external fiscal position; hefty outcropping of government debt; and crotchety coalition politics, which now is, of course, in for a change!

Moody’s said that on the fiscal deficit disquiet, the new government should aim at fixing fiscal concerns by making use of the disinvestment proceeds to seal the gap in the short term. The government needs to ‘thrust’ structural reforms, keeping focus on the expenditure side, thereby working to alleviate pressures in private financing.