New Delhi: To deal with ailing reputation is tough for any economy in the world. Big attention is required from the government to bail out the economy from the situation where India’s credit rating has slipped close to junk. The government has extended task in hand. There is a challenge to restore confidence among foreign investors and as well to provide alternatives to Indian companies who were borrowing loans on lower rates from abroad. 

The Director General of Confederation of Indian Industry (CII) Chandrajit Banerjee says that the only way to deal with downgraded ratings is better policy implementation. He advises that to avoid the serious repercussions, the government should implement Goods and Services Tax (GST), Direct Tax Code (DTC) and increasing FDI limit in various sectors. This will boost the confidence of foreign investors. Increasing FDI in aviation, insurance and multi-brand retail will help in attracting more investments from outside.  

However, taking decisions on policy reforms will be tough for the government due to political reasons. The government had to rollback the decision on allowing FDI in multi-brand retail due to political reasons. The Secretary General of ASSOCHAM D S Rawat has said that the biggest challenge that lies with the government is to overcome their political inability. But in order to make a statement on the government’s seriousness for economic reforms, these decisions need to be taken.

Experts believe that Indian companies are going to struggle for external commercial borrowings (ECB) with downgrade in credit ratings. Companies of power and aviation sector are expected to be hit most. These companies are finding it difficult to get loan on domestic level. Recently, policy changes have been done to facilitate borrowings from outside for these companies. Now the challenge lies with the government to make arrangements for loans in domestic markets. However, the Reserve Bank of India has already embarked on making loans cheaper.

The next challenge for the government and RBI will be to keep rupee stable. According to experts, with FIIs withdrawing from Indian markets, rupee will get weak. In the month of April, FIIs has withdrawn investment worth Rs 760 crore. This is double blow for the economy. RBI is already facing difficulty in dealing with inflation and forex reserves. It is also certain that the stock market will get dent with the downgraded credit rating from S&P.