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  • Category: Government

    What are the benefits of upgrading a country by a credit rating agency?

    Have a query about rating given by credit rating agency? looking out for the details of the rating, the reasons and impact of these ratings? Find responses from experts for all the questions you have.

    Recently, the credit rating agency Moody's has upgraded the sovereign rating of India from Baa3 to Baa2 and the Indian stock markets reacted positively with the news. Is upgrading a country by different rating agencies good for the economy? What are the factors that influence the change in ratings? What are the benefits of upgrade by rating agencies to a country like India?
  • Answers

    5 Answers found.
  • After 2004 this is the first time the credit rating of our country is increased. The recent actions of government like GST scheme, demonetization, aadhaar linking to bank accounts and direct money transfers into the accounts are helped to increase this rating. Because of this, the world will understand that India is a place for doing business and increasing their investment in India. This gives a way for more employment. Productivity will increase. Foreign investments will increase.The chances for development of the country will increase.

    always confident

  • For the first time in 14 years, India is being upgraded.It has gone from positive to stable. Moody's Baa2 is better than Baa3 which is just above Junk status. This would mean increase in foreign debt inflows, stable and a stronger rupee. Better rating means better investments, lending becomes more easier as the confidence in economy improves. Better rating makes the cost of borrowing lower. A new group of investors would look at Inida for their investments. This comes with a catch that if the banking sector sees any distress, then the rating would face a downward pressure.

  • There are some top credit rating agencies in the world which do periodic credit rating of various countries based on certain economic, political and social parameters.

    These ratings are very important as they are done by the reputed agencies and the whole of the world looks on them for aligning their trade and other relations with a particular country.

    The international business and global presence of a country is significantly improved with the upgrading of these ratings.

    Every country has its problems and internal differences but the international ratings are the indication of how the world is seeing us. If we are overall progressing the ratings will definitely be upgraded and all of us should be happy about it.

    Knowledge is power.

  • My answers are as under:-

    (a) Credit rating is done by renowned credit agencies. These are based on various factors like health of economy, foreign currencies available with the Government, ease of doing business, infrastructure development, budget deficit, etc.
    (b) The credit rating of India has been improved from Baa3 to Baa2 after 12 long years by Moody's, which is the most renowned international credit agency. The agency is known for its impartiality and wide acceptability.
    (c) The improvement in credit rating signifies the good health of overall economy of the country. It also signifies people's confidence on the political establishment of the country. The rating reflects the overall positive environment of the country. As a result, improvement in credit rating causes more foreign investment in various sectors of that country.

    Beware! I question everything and everybody.

  • When someone wants to invest his money, he needs to be ensured about the safety and return of his investment. For that he needs to know for sure that the place or organisation or business he wants to invest has the parameters favourable for his investment and he can get the capital and return on that without default.

    However when the investment is going to be another country, the risks are more because of different legal framework, business climate, economic and financial status of the country, its political stability and its integrity in keeping with financial deadlines and international commitments. The established international rating agencies monitor all these happening in every country. They get, dissect and analyse and predict from them what will be happening in the short term and long term economic and political climate in that country. They ate these countries in a scale of investment safety .
    There are various nodes in the rating scale each indicating a separate level of safety grade. The lowest is C denoting"typically in default, little prospect for recovery of principal or interest"

    In the present case, India is assigned a rating Baa2, elevated from Baa3. That denotes the second of the three sub levels in the "Investment Grade, medium grade".

    This will indicate to the large foreign investors that investments in India are safe and is positively increasing. That will encourage more foreign investments in India. Capital investments will increase development, employment and productivity, resulting in the economic growth. However there should be some alert and vigilance to se that the capital inflow is not used to siphon off profits and erode our economy by artificial growth by involving in speculation and non-productive ventures. That is where the will power, vision and determination of the government is tested.

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