Corporate India joins S&P chant on reforms

A day after Standard & Poor's (S&P) came out with its report on how India could be the first among Brazil, Russia, India and China (BRIC nations) to lose its investment-grade rating, markets shrugged off the concern, ending in the green.

The benchmark Bombay Stock Exchange Sensex rose 194 points to close 1.20 per cent higher than Monday'sclosing, after the weak industrial data released on Tuesday further spurred hopes of a rate cut by the Reserve Bank of India.

So, is the concern on India's sovereign rating downgrade exaggerated? While there's no reason to panic just yet, as S&P has only reiterated what is already known, India Inc hopes this would be a wake-up call for the government. Industry captains believe this is the time to act on what the report has highlighted.

Rana Kapoor, managing director & chief executive officer, YES Bank, says globally, rating agencies are involved in a lot of activism. While some of their actions are justified, some are questionable. However, he concedes there are red flags that suggest everything is not fine.

"There is a vision, but it is lacking action. We all know any vision without action is a daydream and any action without vision becomes a nightmare. We have to take signals from events like this. We cannot refute or react, but take time-bound action on the reform path to stimulate growth," he says.

While nobody is denying the near-crisis point the economy has hit, Shailendra Bhandari, managing director, ING Vysya Bank, feels India still deserves an 'investment grade'.

While S&P's warning reaffirms the challenge facing the Indian economy and warrants immediate fast-tracking of reforms and other measures by the government to stimulate economic activity, he doesn't think the country's ability to repay external debt has hit the vulnerable threshold yet, given total external debt as a proportion of the gross domestic product remains a mere 19 per cent.

However, S&P's reiteration of the rating risk has prompted corporate India to flag off some of its concerns yet again. And, this time it hopes this would stir the government out of its slumber, causing it to fast-track some of the measures recommended by the rating agency.

Vinod Nowal, director and chief executive, JSW Steel, says, "This is the second time S&P has cautioned the UPA (United Progressive Alliance) government to initiate second-generation reforms that corporate India is waiting for, with bated breath for nearly a year now. I hope the UPA government takes a cue from S&P's warning and announces a few macro measures which will impede the further slump the Indian economy is trundling towards."

Kiran Mazumdar Shaw, chairman and managing director, Biocon, worries the Cabinet, as well as various groups of ministers, would hold endless meetings without any outcome.

"While the finance minister and the government continue to ignore these signals and feign an 'all is well with the Indian economy' rhetoric, the fact is we are seeing flight of foreign capital from the capital markets, a slowdown of foreign investments and slowing economic growth. The government must announce a slew of reforms immediately to reassure investors we are back on track. The private sector must be incentivised to invest in infrastructure, power and the retail sector, to start with. FDI (foreign direct investment) in retail and aviation must be announced without further delay," she says.