International recognition

Moody's India upgrade is good. It is also a good news that the international rating agency like Moody's has not only praised economic measures taken by Prime Minister Narendra Modi but also upgraded India's sovereign rating to BAA2 with a stable outlook from Baa3 earlier. This is the first time that Moody's upgraded India's rating since 2004. Moody’s upgrade of India’s economic rating can be interpreted as recognition of the raft of structural reforms taken by the current government over the last 3-4 years. This is the first time in 13 years that the international rating agency has raised India’s assessment – to Baa2 from Baa3 – indicating that the economy has moved from ‘stable’ to ‘positive’, and is on a high growth trajectory. Among the principal policy changes that have contributed to improving India’s rating are the implementation of a comprehensive reforms programme, including the introduction of the GST, the Aadhaar system of biometric accounts, direct benefit transfer schemes and measures to address bad loans. The upgrade essentially means that the cost of international borrowing will now become cheaper for the Indian government and Indian corporates, and also lead to a surge in equity markets. Prime Minister Narendra Modi took two important economic decisions. One is of demonetization and other is of GST. The entire nation affirmed faith in PM's speech that after 50 days of demonetization, all economic ails will be removed from the country. Black money, corruption, counterfeiting of notes, stone pelting in Jammu and Kashmir, Naxalism and terrorism would be finished. PM with his declaration of demonetization in a televised addressed to the nation at 8 PM on Nov. 8, 2016, that all high currency notes of 500 and 1000 will no longer be legal tenders. He called up all citizens to exchange their demonetized high currency notes from banks. He appealed to the countrymen to bear with the problems in standing in a queue outside the bank for 50 days in the interest of the nation. The demonetized high currency notes of Rs. 500 and 1000 constituted 86 percent of total currency notes. If RBI report is anything to go by, about 99 percent of the currency came into the banking system. The expenditure on the printing of the news notes exceeded their value. This is one part of the result of demonetization. Its second part is its impact on small and medium business and employment in the country. If CMEI report is anything to go by, 15 lakh people were rendered jobless in the first three months of 2017 due to demonetization. As all economic activities came to a halt, there prevailed gloom in the market. With the introduction of GST, which is PM Modi’s pet economic move, the small and medium businessmen were harmed beyond expectation. Its official paraphernalia of taxation is so lengthy and computerized that it is beyond their understanding. The Moody’s may have upgraded India’s rating, but the ground economic reality tells a different story. The poor are becoming poorer and the rich are becoming richer. The gulf between the poor and the rich has also widened. So, it would be better if Modi Govt. had not patted its back merely at Moody’s upgrade India rating. Prices of all edibles and essential commodities are also going up and up.