India’s relaxation of foreign investment rules credit positive, Moody’s says

MUMBAI India’s decision to relax foreign direct investment in sectors including defence, aviation, and retail is a positive development for the country’s sovereign ratings, said Moody’s Investors Service on Monday.

“The announcement is credit positive because it demonstrates a continuation of reform momentum and paves the way for private investment and a boost in productivity,” said Moody’s.

India announced last week sweeping reforms to rules on foreign direct investment and easier terms for investors in sectors ranging from civil aviation to pharmaceuticals.

But Moody’s warned reforms have stalled in passing a revamped goods and services tax and land acquisition rules.

“We expect that political division will keep the reform process uneven and slow-moving,” Moody’s said.

Moody’s currently rates India at “Baa3”, the lowest investment-grade rating, with a “positive” outlook.