Moody’s questions Centre’s ability to bring in key reforms

The report further said that weak global cues and an impending US rate hike may also have an impact on Indian businesses.

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“A healthy 7.5 per cent GDP growth for India for the fiscal year ending March 2017 and a pick-up in manufacturing activity will be broadly supportive of business growth,” Halan said.

Stating that Indian corporates would benefit from the fall in commodity prices and a resultant moderation in inflation, it said that the loss of reform momentum will impact the corporates.

“But despite these overall supportive domestic conditions for the country’s corporates, potential headwinds loom from a loss of reform momentum,” the report said.

The ruling NDA government has said it is willing to discuss with the Congress to get the GST Bill passed in the winter session of Parliament beginning Thursday and the passage of the Bill in the forthcoming session is essential to ensure rollout of GST from April 1, 2016.

In its 2016 outlook for Indian non-financial corporates, Moody’s said a 7.5 per cent growth, easing inflation resulting in lower interest rate will lead to improving corporate cash flows and be broadly supportive of business growth.

“However, the corporates remain vulnerable to the volatile Indian rupee as against the US dollar and to low commodity prices, which has in turn led to a sharp decline in external trade,” Halan added.

The other ‘downside factors’ that have been listed by Moody’s in its report are loss of reform momentum leading to annual GDP growth falling below 6 per cent, resulting in a deterioration of credit metrics.

Also higher interest rates brought on by rising inflation and/or exchange rate volatility, resulting in a tight funding environment is a factor.

Moody’s said that the upside factors include further government measures that could sustain the GDP growth at 8 per cent or more, leading to a broad-based improvement in corporate credit metrics. It also said that an improvement in the global macroeconomic environment leading to stabilising commodity prices and credit markets would also be positive.

On the sectoral front, Moody’s expects upstream oil and gas companies to benefit from lower fuel subsidy burdens, although low crude and domestic natural gas prices will continue to hurt profitability. It also said that refining and marketing companies should benefit from healthy margins as demand growth outpaces expected capacity additions, it said.

It, however, maintained a negative outlook for metals and mining companies that is reflective of the bleak global commodity prices.