The agency has also retained 'stable' outlook for the country's ratings.
The Reserve Bank of India's rate-setting panel on Wednesday began its three-day deliberations on the next bi-monthly monetary policy amid expectations of at least a 35-basis-point hike in the interest rate to check high inflation. If raised, it will be the third consecutive hike in the repo rate -- the short-term rate at which the RBI lends money to banks. The central bank has already announced to gradually withdraw its accommodative monetary policy stance.
Credit rating agency Standard & Poor's has said it might not downgrade India's sovereign credit rating further, after the government announced plans to reduce the gap between income and expenditure
The Reserve Bank of India's (RBI's) outstanding net forward purchases of US dollars fell by more than 50 per cent from the last quarter of FY22 to $30.86 billion in the June quarter (Q1). The net forwards position was at $65.79 billion at the end of the last fiscal year. The purchases fell by $18.33 billion in June as the central bank intervened in both the forwards and the spot market in order to protect the rupee from excessive depreciation in the face of a widening trade deficit.
The report further pointed out that the current rupee volatility will be 'less damaging than in 1991, when low reserves and a widening current account deficit prompted India's last balance of payment crisis'.
Banks looking to raise capital via bond sales to fund decade-high credit growth were compelled to put some of these debt issuances on hold amid a sharp rise in yields since late September, sources told Business Standard. A major private lender, Axis Bank, has not yet followed through with a planned issuance of infrastructure bonds worth around Rs 3,000 crore. This is because volatility in the bond market in late September led to investors seeking higher yields, sources said.
Although its ratings outlook for foreign currency and local currency is stable, Moody's outlook for the country says it faces challenges in macroeconomic management and a backlog of structural reforms. "India's ratings are based on the assessment of the country's moderate levels of economic and institutional strength, that are supported by a rapidly growing and well-diversified economic structure," said Aninda Mitra, VP and senior analyst at Moody's.
Surplus liquidity in the banking system as measured by absorption of excess funds by the Reserve Bank of India (RBI) fell sharply at the end of the last week due to outflows on account of advance tax payments. According to the RBI data, the net liquidity absorbed by the central bank on September 16 was at Rs 3,243.57 crore, much lower than the average of Rs 56,809.92 crore in the preceding four days of the week. The average absorption of funds by the RBI so far in September is at Rs 1.13 trillion, against the average of Rs 1.2 trillion in the previous month, the data showed.
International rating agency Fitch said on Tuesday the change in India's sovereign rating is constrained by the high level of fiscal deficit and its review will be done after the budget for 2005-06 has been presented.
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The agency's lead analyst Art Woo added that fiscal management is a challenging task.
Finance Minister Nirmala Sitharaman on Friday chaired a meeting with chiefs of public sector banks and assessed their readiness to tackle any possible disruptions due to the Omicron variant. In a tweet, the finance ministry said during the meeting with CMDs/MDs, held through virtual mode, the minister also reviewed various steps taken by PSBs in implementing pandemic-related measures initiated by the government and RBI.
Late-recovery led by rate sensitives and capital good stocks; banks shares slip on profit booking.
As India raised its pitch for upgrade of ratings from the current lowest investment grade, Atsi Sheth, vice-president and senior analyst, sovereign risk group, Moody's Investors Service, tells Business Standard that she does not foresee any movement from the current grade in the next 12-18 months.
Days after the US Fed raised the interest rate, the RBI may go in for its third consecutive policy rate hike by at least 35 basis points to check high retail inflation, experts said. The central bank has already announced to gradually withdraw its accommodative monetary policy stance. The Reserve Bank of India's rate-setting panel -- the Monetary Policy Committee -- will meet for three days from August 3 to deliberate on the prevailing economic situation and announce its bi-monthly review on Friday.
The ongoing headwinds like war-triggered inflation, rate tightening by RBI and weak rupee will lead to a Rs 60,000 crore increase in 'risky debt' in FY23, a ratings agency warned on Monday. Defining 'risky debt' as borrowings by companies having a net leverage or debt to operating profit ratio of more than five times, India Ratings said the ongoing troubles will take the stock of such loans to Rs 6.9 lakh crore by end of FY23, as against the Rs 6.3 lakh crore it would have been but for the Russian invasion of Ukraine. An analysis of 1,385 corporate entities led the domestic ratings agency to trim revenue growth projection for entities in a post-war scenario and also forecast narrowing of the profit margins due to higher commodity prices, an increase in interest rates of up to 1 per cent and the rupee depreciating by a tenth.
Medicine sales grew at a fast clip in smaller cities like Madurai, Meerut, Agra, and Varanasi in the last 12 months. The domestic pharmaceutical market, overall, has grown 12.3 per cent in this period, according to data from IQVIA MAT for April. MAT refers to the moving annual turnover or the turnover of the last 12 months. The data further showed that the top 30 cities contributed around 32 per cent to sales.
The Reserve Bank of India's rate-setting panel on Wednesday started discussions to firm up the next bi-monthly monetary policy amid expectations that it might retain status quo on interest rate but change its monetary policy stance amid rising inflation on account of geopolitical developments.
On Wednesday, the finance minister expressed concern about the high fiscal deficit of about 6.8 per cent this year. He said some international rating agencies -- S&P, Moody's and others -- can think of downgrading India.
Global ratings agency Standard & Poor's on Tuesday raised its long-term foreign currency rating of India by one notch to 'BB+', with a stable outlook, reflecting the country's improved external position and growth prospects.
Corporate India's credit quality showed a sharp improvement in the second half of FY22, but high input prices and withdrawal of pandemic-related relief measures can pose pressures in the new year, rating agencies said on Friday. Crisil Ratings, which rates a large number of financial sector entities, reported an improvement in the credit ratio -- the number of upgrades to downgrade -- to 5.04 times in the second half of this financial year, from the 2.96 per cent in the first half of the fiscal. It attributed the improvement to a sustained rebound in demand, which lifted revenues of most sectors to pre-pandemic levels and proactive relief measures by the government that cushioned the pandemic blow.
Ratings agency Moody's on Tuesday affirmed India's sovereign rating and upgraded the country's outlook to 'stable' from 'negative', citing receding downside risks to the economy and financial system.
The country's current account deficit is likely to hit a three-year high of 1.8 per cent or $43.81 billion in FY22, as against a surplus of 0.9 per cent or $23.91 billion in FY21, a report said on Thursday. According to an assessment by India Ratings, the Current Account Deficit (CAD) has moderated to $17.3 billion or 1.96 per cent of GDP in the fourth quarter of FY22 as against $8.2 billion or 1.03 per cent in the year-ago period, and massively down from $23.02 billion or 2.74 per cent in Q3, which was a 13-quarter high. The improvement in the key numbers are due to the remarkable improvement in merchandise exports in FY22, when it grew 42.4 per cent as against a negative 7.5 per cent in the pandemic-hit FY121.
After two years of a record low interest-rate regime, Indian corporate houses are experiencing a sharp and abrupt increase in funding costs. With the Reserve Bank of India last month making an unequivocal turn towards policy tightening amid high inflation, firms looking to tap the capital markets for funds are ending up shelling out more. The yield on the benchmark triple-A-rated corporate bonds maturing in three years has climbed 98 basis points (bps) since the policy rate hike in May. It was last at 7.47 per cent, Bloomberg data showed.
This may come as a surprise to many. Retail price inflation in petrol was the lowest at 10.21 per cent in March since November 2020. In diesel, it scraped the bottom of the barrel at 5.19 per cent in the last month of 2021-22 since February 2020. Even liquefied petroleum gas (LPG) was at a nine-month low of 9.97 per cent in the month.
'The finance ministry and the RBI will never admit to the difficulties in the economy because if they do so, it will adversely impact the financial markets, etc.' 'They like to present a rosy picture that everything is fine and under control.'
Ruling out any change in India's sovereign rating due to a political standoff over the Indo-US nuclear deal, credit rating agency Moody's on Wednesday said the crisis was not serious enough to dent the country's economic policy framework.
'While we note the very strong cyclical recovery in the economy, we believe there is still uncertainty over medium-term prospects.'
The Reserve Bank of India (RBI) will stay away from changing key rates - including the reverse repo rate - this fiscal in the backdrop of Omicron. However, it will continue to shape the rate movements through liquidity market operations. Soumya Kanti Ghosh, group chief economic advisor, State Bank of India, said whether Omicron surge or not, there is not going to be any hike this year. However, the central bank may continue to shape rates through market operations.
The recurrent increases in fuel prices over the past 10 days are eating into the margins of transporters, who will be forced to pass on the hikes to their customers. This, in turn, is set to make the prices of daily consumables and other goods dearer, affect consumption, and slow economic growth, said transporters and analysts. Freight rates on grand trunk routes have shot up 3-4 per cent month-on-month in the past few days, according to the Indian Foundation of Transport Research & Training (IFTRT).
The unexpected interest rate hike by the RBI on Wednesday will have the banking system on average making a 10-15 bps gains on the yields, with private banks making larger gains as 57 per cent of their loans are linked to external benchmark rate and 40 per cent to the marginal cost of lending rates, as per a report. Stating that lenders and borrowers will face volatile times with the Reserve Bank raising the repo rate by 40 bps to 4.40 per cent and the cash reserve ratio (CRR) by 50 bps on May 4 in an off-cycle policy move, India Ratings said the market rates had already been moving higher before the move. The 364-day T-bills have moved up 120 bps and 10-year G-sec by 140 bps since May 2020, when the repo rate was cut to a record 4 per cent, which led to an expectation of a faster and sharper rise in interest rates in the system but the central bank stayed the course to support the fragile economy battered by the pandemic.
Indian drug firms get a shot in the arm in the $12 bn Australian drug market as the Therapeutic Goods Administration (TGA), Australia agrees to accelerate the drug approval process in that country for Indian players who already have an approved plant and product from one of the stringent regulatory authorities like US, EU or Canada. From current sales of $340 mn, the Indian firms can see a significant upside in sales; felt Dinesh Dua, former chairman of the Pharmaceutical Exports Promotion Council of India (Pharmexcil), and the MD of Nectar Lifesciences. He highlighted that only 12 percent of the Australian drug market is generic, as against 80-90 per cent in the US or EU. Of this $1.5 bn generic drug market in India, Indian companies have a small share.
The forthcoming budget needs to delay fiscal consolidation, instead should focus more on supporting the pandemic battered-economy and boost consumption demand by offering income tax soaps and cutting fuel taxes, says a report. In a pre-budget report, India Ratings said it expects the new budget to consolidate and strengthen the plan set out in the last budget, rather than trying out new things by continue with the revenue and capital expenditure pattern of FY'22 to provide stability and consolidation to the past/ongoing efforts, and to focus on boosting demand by generating employment opportunities in areas/sectors that have been impacted more by the pandemic. The report therefore expects the finance minister to delay fiscal consolidation and make it to be a gradual and calibrated process, thus ensuring the necessary fiscal support that the economy needs is available till the recovery acquires its own momentum.
Uncertainty looms over India's export outlook, with the new Covid-19 variant Omicron spreading rapidly across the country's key shipment destinations. With the US and parts of Europe witnessing more than 100,000 Covid-19 cases a day, exporters expect some disruption. However, there may not be an immediate decline in exports from India because the order books remain strong at least for the next few weeks, they said.
Costlier vegetables and eggs pushed up retail inflation to a nearly six-and-a-half year high of 7.61 per cent in October, keeping it significantly above the comfort zone of the Reserve Bank.
Credit rating agency Moody's Investors Services said on Monday that it had upgraded India's country ceiling for foreign currency debt to Ba1, the top of the speculative grade, from Ba2 due to a substantial improvement in the external liquidity.
Since January 2021, the inflation rate in health has stood in the range of 6.08-8.44 per cent.
