International ratings agency Moody’s Analytics has cautioned Prime Minister Narendra Modi over the issue like beef ban and the instances of violence ensuing over it, which has docked the incumbent under the string of criticism. It also commented that the country may lose domestic and global credibility if the NDA government doesn’t contain such incidents.
The global agency also opined that the ongoing assembly elections in Bihar could “prove pivotal to Modi’s leadership”.
Stating that BJP does not have a majority in Rajya Sabha to pass crucial reforms, the agency’s report dubbed the Opposition as being ‘obstructionist’. It said even though PM Modi has distanced himself from “nationalist jibes”, his government has also not helped itself in recent times with controversial comments from various BJP members.
“While Modi has largely distanced himself from the nationalist jibes, the belligerent provocation of various Indian minorities has raised ethnic tensions…. Modi must keep his members in check or risk losing domestic and global credibility,” Moody’s Analytics said in a recent note on ‘India Outlook: Searching for Potential’.
Commenting on Bihar polls, it added, “The BJP is not the incumbent (in Bihar), so a win here would help secure an upper house majority… Overall, it is unclear whether India can deliver the promised reforms and hit its growth potential. Undoubtedly, numerous political outcomes will dictate the extent of success.”
The comments from Moody’s Analytics, the economic research and analysis division of Moody’s Corporation, are the first by any major global institution over the recent political controversies in India.
According to its report, the Indian economy is expected to grow around 7.3% year-on-year in September quarter which is below the expected potential of around 9 or 10%. It also said that the key economic reforms like Goods and Service Tax (GST), revamped labour laws and land acquisition bill would improve India’s productivity.
Moody’s Analytics however also underlined that there are indications that foreign investors have been less optimistic about India’s economic prospects. Net financial flows into equity were around US$ 16 billion in 2014.
“The Sensex has fallen around 11 per cent since the euphoria behind the new government propelled the stock market. But consistent failure to deliver key economic reforms has faded the optimism,” the report said.
The slowdown in global growth will prove a major headwind for Indian exporters, Moody’s said, adding that the fall in exports from 2015 is expected to continue in 2016.
“The newfound stability in India’s current account balance could come under renewed stress if global growth slows more. So far, lower oil prices have buttressed the trade balance. But a rebound in prices if oil supply rebalances could see the trade balance deteriorate,” Moody’s said.
(With inputs from the PTI)