There had been spates of upgrades and downgrades about Indian economy for some time by credit rating agencies, Standard & Poor’s and Moody’s. The Indian banks and rupee bond have been rated by these rating agencies over last few weeks.
S & P has upgraded the Indian banking sector contrary to Moody’s and Moody’s have upgraded the long term rupee bonds to investment categories.
These two upgrades when the Indian economy is facing the slowdown in economy and lack of confidence in Indian economy by the investors (domestic as well as foreign), the weak rupee, political uncertainty at policy level as well as the social unrest that India has been witnessing since last one year will boost the confidence in the Indian economy.
India is expected to grow at a rate of 6.9% this fiscal year and has capacity to grow even at higher rates but the political reasons, policy paralysis as well as social unrest are making things worse for Indian economy for long time. The economy needs second phase of economic and financial reforms to the increase its growth rates but the government has failed to keep its promises.
In such events the bonds upgrade will helps a lot Indian economy in many aspects from foreign investment to management of fiscal deficit to issue of weakening rupee. This is expected to increase the capital inflow to Indian shores from other economies that are witnessing higher volatility as the investors are getting a promising investment in relatively strong bonds. So in coming days Indian economy is going to witness some increase in its portfolio investment and a stronger rupee compared to 2011 in 2012.