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Says PM will lose credibility at home and abroad

With two phases remaining in the Bihar Assembly elections, Prime Minister Narendra Modi was cautioned by a global research firm to keep BJP members from making provocative statements or risk losing credibility at home and abroad.

Moody’s Analytics, the research and analysis arm of global rating agency Moody’s, was of the view that leaders of various political parties are making controversial comments fanning “ethnic tensions”, which is not good for the government’s image and its economic reform agenda.

“While Modi has largely distanced himself from the nationalist gibes, the belligerent provocation of various Indian minorities has raised ethnic tensions,” said Moody’s
Analytics in the report “India Outlook: Searching for Potential”. The critique comes after India climbed four places to rank 130 in World Bank’s latest ease of doing business report.

The research firm felt Parliament will also face the heat of the charged atmosphere, putting a hurdle in the government’s economic reform agenda, as the BJP does not have a majority in the Rajya Sabha.  

“Along with a possible increase in violence, the government will face stiffer opposition in the Upper House as debate turns away from economic policy,” Moody’s Analytics stated.

The report also believes the Bihar Assembly poll results will have a bearing on national politics and “prove pivotal to Modi’s leadership”.

“The BJP is not the incumbent (in Bihar), so a win here would help. Overall, it is unclear whether India can deliver the promised reforms. Undoubtedly, numerous political outcomes will dictate the extent of success,” it added.

The report, however, said “its commentary is independent and does not reflect the opinion of Moody’s Investors Service Inc, the credit ratings agency which is also a subsidiary of Moody’s Corporation.” As per Moody’s projection, India’s GDP growth for September quarter would be 7.3 per cent, while for the full fiscal it would be 7.6 per cent.

With the RBI slashing the benchmark repo rate by 1.25 per cent this year, the report said for long-term potential growth, reforms are needed; low interest rates will bolster the economy only in short term.

Moody’s Analytics said due to domestic sentiments, Indian equities have suffered and lack key reform initiatives has faded the optimism.

“The Sensex has fallen around 11 per cent since the euphoria behind the new government propelled the stock market. But consistent failure to deliver key