Moody’s gives Modi a boost by raising India’s sovereign bond rating

The Moody’s upgrade is a shot in the arm for Prime Minister Narendra Modi’s government and the reforms it has pushed through. (Reuters)
Updated 17 November 2017
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Moody’s gives Modi a boost by raising India’s sovereign bond rating

MUMBAI/BENGALURU: Moody’s Investors Service upgraded its ratings on India’s sovereign bonds for the first time in nearly 14 years on Friday, saying continued progress on economic and institutional reform will boost the country’s growth potential.
The agency said it was lifting India’s rating to Baa2 from Baa3 and changed its rating outlook to stable from positive as risks to India’s credit profile were broadly balanced.
Moody’s upgrade, its first since January 2004, moves India’s rating to the second lowest level of investment grade.
The upgrade is a shot in the arm for Prime Minister Narendra Modi’s government and the reforms it has pushed through, and it comes just weeks after the World Bank moved India up 30 places in its annual ease of doing business rankings.
All Indian markets including stocks, bonds and rupee rallied on the ratings upgrade.
“It seems like Santa Claus has already opened his bag of goodies,” said Lakshmi Iyer, head of fixed income at Kotak Mutual Fund said.
“The move is overall positive for bonds which were caught in a negative spiral. This is a structural positive which would lead to easing in yields across tenors,” she said.
Last year, India lobbied hard with Moody’s for an upgrade, but failed. The agency raised doubts about the country’s debt levels and fragile banks, and declined to budge despite the government’s criticism of their rating methodology.
The government cheered the upgrade on Friday with Economic Affairs Secretary S. Garg telling reporters the rating upgrade was a recognition of economic reforms undertaken over three years.
Moody’s said the recently-introduced goods and services tax (GST), a landmark reform that turned India’s 29 states into a single customs union for the first time, will boost productivity by removing barriers to inter-state trade.
“In the meantime, while India’s high debt burden remains a constraint on the country’s credit profile, Moody’s believes that the reforms put in place have reduced the risk of a sharp increase in debt, even in potential downside scenarios,” the ratings agency said in a statement.
Still, some market participants questioned the timing of the move.
“The timing is little dicey for the upgrade given that there are lot of concerns over the government’s fiscal discipline,” said a foreign bank dealer, adding he did not expect other agencies to follow Moody’s.
Moody’s said it expects India’s real GDP growth to moderate to 6.7 percent in the fiscal year ending in March 2018 from 7.1 percent a year earlier.
The agency also raised India’s local currency senior unsecured debt rating to Baa2 from Baa3 and its short-term local currency rating to P-2 from P-3.


Ex-Nissan chief Ghosn charged, may face new allegations

Updated 12 min 55 sec ago
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Ex-Nissan chief Ghosn charged, may face new allegations

  • Authorities are also widely expected to re-arrest him later Monday over separate allegations that he also under-reported his income by a further four billion over the past three years
  • Under Japanese law, suspects can be re-arrested several times for different allegations, allowing prosecutors to question them for prolonged periods

TOKYO: Japanese prosecutors have formally charged Carlos Ghosn with financial misconduct for under-reporting his salary, local media reported on Monday, three weeks after the auto tycoon’s arrest stunned the business world.
Former Nissan chairman Ghosn, 64, has been in detention since his November 19 arrest on suspicion of under-declaring his income by some five billion yen ($44 million) between 2010 and 2015.
Authorities are also widely expected to re-arrest him later Monday over separate allegations that he also under-reported his income by a further four billion over the past three years.
Under Japanese law, suspects can be re-arrested several times for different allegations, allowing prosecutors to question them for prolonged periods — a system that has drawn criticism internationally.
Monday was the final day prosecutors can hold Ghosn and close aide Greg Kelly before either charging or re-arresting them, and a further arrest would allow them another 22 days of questioning.
In addition to charges against Ghosn, prosecutors also indicted Kelly and Nissan itself, according to local media, as the company submitted the official documents that under-reported the income.
Ghosn denies the charges and is in a “combative” frame of mind, according to sources at Renault, the company he still formally leads — even if the French car giant has appointed an interim chairman.
The Japanese firms in the three-way alliance with Renault — Nissan and Mitsubishi Motors — have both sacked the Franco-Lebanese-Brazilian as chairman.
The millionaire auto sector star, who attracted some criticism for a perceived lavish lifestyle, is now alone in a spartan cell in a Tokyo detention center, in a tiny room measuring just three tatami mats — around five square meters.
He has reportedly told embassy visitors he is being well treated but has complained of the cold, with Monday’s temperature in the Japanese capital hovering around five degrees Celsius.
He spends his time reading books and news reports and is said to be unhappy about the rice-based food.
According to local news agency Kyodo, he has admitted signing documents to defer part of his salary until after retirement but said this amount did not need to be declared as it has not yet been definitively fixed.
A source close to the investigation has said Ghosn and Kelly allegedly put the system in place after a new law came in obliging the highest-paid members of the firm to declare their salary.
Ghosn is suspected of deferring part of his pay to avoid criticism from staff and shareholders that his salary was too generous.
Nissan is appealing to a court in Rio de Janeiro to block access by Ghosn’s representatives to a luxury apartment on Copacabana Beach
“We are closely watching if he is actually indicted and then found guilty,” said Satoru Takada, an analyst at TIW, a Tokyo-based research and consulting firm.
“If he is exempted from prosecution or found innocent, it is going to create huge confusion in Nissan’s management,” Takada told AFP.
It is unclear if Ghosn can be bailed before a potential trial.
In Japan, prosecutors and defendants begin a trial at a district court and can appeal to a high court and the Supreme Court. It may take several years before reaching a final judgment.
If found guilty, Ghosn could face a 10-year prison sentence.
The affair represents a staggering turnaround for a figure celebrated for saving Nissan from the brink of bankruptcy and rebuilding it as a money-making subsidiary of Renault.
Nissan has begun a process of choosing Ghosn’s successor, with the final decision expected on December 17.
His arrest has sparked incredulity at Renault, which owns 43 percent of Nissan and says it has not seen a detailed account of the charges against Ghosn.
It has also fueled anger in Lebanon, with digital billboards around Beirut proclaiming “We are all Carlos Ghosn” under a picture of the magnate.
“A Lebanese phoenix will not be scorched by a Japanese sun,” Interior Minister Nohad Machnouk has declared.