Winter session: Moody's, S&P stress on importance of GST passage, reforms

The month-long Winter Session of the Parliament went underway on Thursday, with the Centre saying that main focus will be on the long-pending Goods and Services Tax, other important policies that have been held up for a long time. 

In the run up to the Winter Session, rating agencies like Moody's, Fitch, S&P, all echoed the same thing -- the importance of passage of the GST bill, other reforms for investments and a consistent, good credit rating. 

These bills will be the turning point for the Indian economy amid global slowdown, the agencies agree.

Moody's:

Moody's Investors Service has said that failure by the government of implementing GST and land acquisition laws could hamper investment and signal a derailed reform prospect.

Moody's cautioned that a loss of momentum on reforms may hamper investment and prove to be a 'downside factor' for Indian companies, even as it said that most corporates will benefit from strong economic fundamentals and an accommodative monetary policy.

But despite these overall supportive domestic conditions for the country's corporates, potential headwinds loom from a loss of reform momentum, the agency listed. 

"It seems highly unlikely that the major reforms will get enacted by the Upper House of Indian Parliament where the ruling coalition is in minority. A failure to implement these reforms could hamper investment amid weak global growth," Moody's VP and Senior Credit Officer Vikas Halan said.

S&P Ratings:

Expressing concern over the slowdown in the pace of reforms, Standard & Poor's has said India's rating could come under stress if government fails to pursue reforms agenda and overshoots fiscal deficit target.

It ruled out a rating upgrade for the country in the next 12-18 months but said that in case the government is able to get the Goods and Services Tax (GST) bill passed in the forthcoming Winter Session of Parliament, it would be a credit positive.

"GST will bring in a simple tax regime and a business friendly environment. The passage of the GST bill will be credit positive for India. It would indicate that the government's reform initiative is picking pace with a strong momentum," the rating agency said in its report.

Fitch:

Over and above the passage of the GST bill and land acquisition bill, Fitch has said that the liberalization of foreign direct investment (FDI) rules in 15 sectors is a significant structural macro economic reform that will support investment and real GDP growth over the long term.

The goods and service tax (GST) bill proposes a national GST bill to be implemented from April 2016. "This is particularly significant for the economy - but more because it could contribute to diminishing inter-state trade barriers and creating a single internal Indian market, rather than strengthening the fiscal revenue base," Fitch added.  

Unlike the Monsoon session, where the Congress-led opposition had disrupted the session over the Lalit Modi row and the Vyapam scam, Finance Minister Arun Jaitley is not leaving any stone unturned to pass the bill in this session. 

In fact, the government has said that it is ready to discuss any matter with the opposition and appealed all parties to pass GST bill.

On Tuesday, Jaitley offered to discuss the changes with Congress in the GST bill but counselled the party to reconsider its suggestions saying some of them can "damage" the system much more than it can benefit.

The Congress had stalled passage of the GST Bill in the last session of Parliament over its demand that a revenue-neutral rate not higher than 18% be mentioned in the Constitution Amendment bill.