Ace investor, Rakesh Jhunjhunwala, Partner, Rare Enterprises said the ratings upgrade by Moody’s earlier on Friday did not come as a surprise for him but, it could be for those who were criticizing efforts made by the Modi government to revive the economy.
Jhunjhunwala said he sees the economy growing by 7.5-8.0 percent by next year. Most importantly, he said it is a recognition of the fact that however disruptive in the short term the measures were, all the actions which the government took were correct, bold and required, he said in an interview to CNBC-TV18.
It will lead to faster economic growth in times to come. “This upgrade is also in recognition by the Moody’s that there is not going to be some big havoc on the fiscal side, and the direction which the government is undertaking is going to lead to higher economic growth, and it is also a befitting reply to critics of Modi government,” said Jhunjhunwala.
Coming to the impact on markets and India Inc., Jhunjhunwala said the mother of all bull markets has just begun and investors have nothing to worry about. Financials will be the biggest beneficiary including private, public sector banks from Moody’s upgrade.
The biggest advantage to India Inc. from the Moody’s upgrade, he said, is that it will allow India to borrow funds at a lower rate. Lot of funds which have a mandate to invest in countries with a specific rating can now invest in India.
It will also allow Indian companies who borrow most of their capital from abroad to get better rating which would be much cheaper. Now with influx of funds, investors should keep an eye on the investment cycle which could well add 100-150 bps to the GDP.
“In 2002-2003 the ratio of investment to GDP was 26-27 percent, it went up to 35-36 percent in 2008. I expect that kind of cycle. The investment has to revive in this country. If the ratio goes up to 34-35 percent, that itself would add 100-150 bps to the GDP,” said Jhunjhunwala.
Commenting on the elections, Jhunjhunwala said he is confident the ruling government will win Gujarat elections and 2019 general elections is still far away.