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Informist, Monday, Jun. 30, 2025

 

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--Sitharaman: Pvt capital mobilisation much below requirement 
--CONTEXT: Finance Minister Sitharaman speaking at UN event in Spain 
--Sitharaman: India undertook reforms which enhanced investor confidence 
--Sitharaman: India undertook reforms which reduced transactional costs 
--Sitharaman: Multilateral development bks must assume stronger enabling role 
--Sitharaman: India sovereign rtg doesn't reflect macroeconomic stability
 

 

NEW DELHI – Finance Minister Nirmala Sitharaman Monday said India's sovereign credit rating does not fully reflect the country's macroeconomic stability, sustained high growth trajectory, and sound fiscal management. Sovereign credit rating methodologies often understate key fundamentals, Sitharaman said, adding that methodologies need to evolve "to better reflect structural strengths and long-term resilience of emerging market developing economies."

 

"Reforming rating methodologies would not only enhance fairness but also reduce financing costs and unlock far greater volumes of private investment," the Indian finance minister said at the United Nations' International Business Forum in Spain.

 

India is currently rated 'Baa3' by Moody's Rating, the lowest investment grade, while Fitch Ratings and S&P Global Ratings rate the country 'BBB-'. Moody's officials met the Indian government earlier this month for the semi-annual rating review. Informist had reported on Jun. 5 that Moody's will consider the recent India-Pakistan conflict in its assessment of India's sovereign credit rating. 

 

Speaking on the need to unlock private capital for sustainable development, Sitharaman said there is an urgent need for targeted efforts to overcome investment barriers and aligning financial flows with development priorities. While there has been growth in private capital mobilisation in recent years, it remains "significantly below what is required", with low- and middle-income countries receiving a disproportionately small share, Sitharaman said.

 

For emerging economies, key challenges include the high cost of capital, regulatory and institutional constraints, limited local capacity, and high perceptions of risk, both country-specific and currency-related, she said. "Effective mobilization of private capital demands a multi-pronged strategy, combining robust domestic reform with strengthened international cooperation."

 

In order to effectively mobilise private capital, Sitharaman said, there is a need for strong domestic financial markets and addressing perceived risks through institutional reforms. "Emerging economies often face high risk perceptions, which raise financing costs and deter investment," she said.

 

Sitharaman said India has addressed the challenge of high risk perception by establishing independent regulators, implementing transparent bidding processes, standardising contracts, and improving the ease of doing business. "These reforms have significantly enhanced investor confidence and reduced transaction costs," she said.

 

The finance minister called for creating scale in investment opportunities and blended finance for attracting private capital. She also said multilateral development banks and development finance institutions need to assume a stronger enabling role.

 

"Despite growing global consensus, actual financial flows to Emerging Markets and Developing Economies have struggled to gain momentum," she said. "This underscores the need for early, structured engagement between MDBs (multilateral development banks) and credit rating agencies to recalibrate risk assessments and unlock sustainable capital at scale."  End

 

Reported by Shubham Rana

Edited by Ashish Shirke

 

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