Monday, 4 July, 2022
HomeEconomyWith no end to credit woes, Modi govt under pressure to take...

With no end to credit woes, Modi govt under pressure to take new steps to revive growth

Modi govt will have to consider other demand & supply-side measures to turn around economy and improve credit profiles in the near term.

Text Size:

Mumbai: A $20 billion tax cut and the lowest borrowing rates in almost a decade may not be enough to bolster the credit metrics of Indian firms, top raters in the country say, putting pressure on policymakers to take additional steps to kick start the flagging economy.

“A meaningful and broad-based improvement in credit quality may not be on the horizon yet,” analysts at Moody’s Investors Service’s local unit ICRA Ltd. said in a note. Indian authorities may need to consider other demand and supply-side measures if they are to turn around the economy and improve credit profiles in the near term, ICRA said.

A 15-month long cash crunch in the shadow banking sector and a sharp slowdown in economic growth has dragged the financial health of Indian firms to multi-year lows. Crisil Ltd.’s credit ratio — the number of upgrades to downgrades — dropped to 1.21 in the six months to September, the lowest in three years, while a Care Ratings index shows that credit metrics of Indian companies fell to the lowest in at least seven years.

Meanwhile, the Reserve Bank of India had slashed its economic growth projection for the year through March 2020 to 6.1% down from a previous estimate of 6.9%, the biggest reduction in its forecast in at least five years. Prime Minister Narendra Modi may have to come up with more short-term measures to jump-start the economy.

The government has already announced a slew of steps, including mergers of state-run banks and tax benefits on vehicle purchases, while RBI has cut benchmark interest rates five times this year and promised further easing if needed.

“The ability of the measures to improve sentiment and liquidity will be crucial to the credit outlook of corporates in fiscal 2020,” according to a Crisil note. “The credit outlook continues to be cautious.” – Bloomberg


Also read: Amazon, Flipkart & Mukesh Ambani will help save India’s banks


 

Subscribe to our channels on YouTube & Telegram

Why news media is in crisis & How you can fix it

India needs free, fair, non-hyphenated and questioning journalism even more as it faces multiple crises.

But the news media is in a crisis of its own. There have been brutal layoffs and pay-cuts. The best of journalism is shrinking, yielding to crude prime-time spectacle.

ThePrint has the finest young reporters, columnists and editors working for it. Sustaining journalism of this quality needs smart and thinking people like you to pay for it. Whether you live in India or overseas, you can do it here.

Support Our Journalism

Most Popular

×