Inconsistent rules and NPLs hamper India's credit rating

Author: Amélie Labbé | Published: 3 Oct 2016

A lack of legislative consistency is damaging India's credit rating, with poorly drafted rules and tax treatment of non-Indian investors causing particular concern. The glut of non-performing loans (NPLs) is also blocking progress.

Moody’s announced at the end of September that it was unlikely to reconsider the Baa3 rating it had given the nation for up to another two years, despite giving the rating a positive outlook.

India's Economic Affairs secretary Shaktikanta Das said that he was concerned about the initial rating given in April 2015 and the methodology behind it, arguing that it does not reflect India’s wide-ranging economic and financial reforms properly. 

Moody’s justified the rating on the basis of slow private sector investment, uncertain banking sector resiliency and a lack of legislative consistency across the financial and business sectors. The country’s growing levels of  NPLs could also have an important part to play in...