Implement reforms to avoid risk of rating downgrade: Nomura

Implement reforms to avoid risk of rating downgrade: Nomura

Brokerage firm Nomura today said the country still stands a chance to get downgraded if the government does not implement the recent reform measures and complement them with more reforms.

"If this does not materialise or is not followed by more reforms, there is a risk of downgrade. The rating agencies have already warned of a possible action and are waiting to see concrete actions," Nomura Chief Economist Sonal Verma told reporters here.

Noting that only 30 per cent of the announcements made post-September 14 have been implemented till now, she said there is a need for full implementation of the measures and also supplement them with new ones.

Her wishlist includes early introduction of the goods and services tax, clearance of the new land acquisition Bill, ramping up cash transfers and setting up of the National Investment Board.

The slew of reform measures, including hiking diesel prices, capping subsidised cooking gas and raising sectoral foreign holding like multi-brand retail, do not address the fundamental macroeconomic imbalances in the system but will help capital inflows, she said.

The diesel price hike will have a limited 0.1 per cent impact on the fiscal deficit, she said, estimating that the
final number will come in at 5.8 per cent, much above the government's upwardly revised target of 5.3 per cent.

This will entail an additional borrowing of Rs 40,000 crore by the government over and above its target of Rs 5.69 lakh crore for the year, Nomura's fixed income strategist Vivek Rajpal said.