Dashing the hopes of the government, global rating agency Moody’s on Tuesday said an upgrade to India’s sovereign rating could not materialise soon, but added that it might happen in 1-2 years if the country showed tangible progress in fiscal consolidation, policy reforms and solution to bad debt problem in the banking sector.

“We see pressure building up in 1-2 years and any tangible change could bring about a change in rating,” said Moody’s Sovereign Group senior vice-president Marie Diron, ahead of a meeting with finance ministry officials on Wednesday for an interaction.

Currently, Moody’s has lowest investment grade ‘Baa3’ rating with a positive outlook for India. In April 2015, Moody’s had said it could upgrade the rating in 12-18 months.

Even though the rating agency appreciated recent reforms measures such as the Constitutional Amendment Bill on Goods and Service Tax, Diron said the reform process in general is gradual and the impact would be felt in medium term. She said India’s economic growth would be driven by consumption as private investment continues to be muted.

“It is still early days for an assessment for reforms (initiated in last two years). What we did not anticipate as much is the weakness in the investment, which is a surprise on the downside,” she said.

Faster fiscal consolidation, implementation of reforms with tangible effect, addressing infrastructure bottlenecks and dealing with monsoon volatility challenges would determine a rating upgrade going forward, Diron said.

“When we feel there is enough information/development that warranted new discussion on the factors I have mentioned, that’s when we meet for a rating discussion (in Moody’s),” she said on the likelihood of a review in the near future.

On questions raised by Indian officials that the global rating agencies are not giving due weightage to policy reforms in ratings assigned to the country like they do for developed countries, Diron said the rating methodology is uniform for all sovereigns.

Moody’s has listed six agenda on the list of pending reforms for India — land acquisition Bill, labour law reforms, significant infrastructure investment, tangible benefit from the ‘Make in India’ initiative, tax administration and public sector bank (PSB) reforms.

The gross NPAs of 27 public sector banks have doubled to R5.97 lakh crore as on June 30, 2016, from the year-ago period, after the Reserve Bank of India started the process of asset quality review from Q3FY16 to clean up their balance sheets by March 2017.

The government is implementing a R70,000-crore capital infusion from budgetary support in the PSBs to improve their capital adequacy ratio over four years. However, the agency is of the view that it is too little for the banks who could find it difficult to raise funds from the market due to stress on their balance sheet.