US-based International rating agency Moody’s Investors Service has upgraded India’s local and foreign currency issuer ratings to Baa2 from Baa3 with a stable outlook citing improved growth prospects driven by economic and institutional reforms. It changed the outlook on the rating to stable from positive. The rating agency has revised the sovereign rating of India a notch above investment grade after a long gap of 14 years. It has also raised India’s long-term foreign-currency bond ceiling to Baa1 from Baa2, and the long-term foreign-currency bank deposit ceiling to Baa2 from Baa3. The short-term foreign-currency bond ceiling remains unchanged at P-2, and the short-term foreign-currency bank deposit ceiling has been raised to P-2 from P-3. The long-term local currency deposit and bond ceilings remain unchanged at A1.
“The decision to upgrade the ratings is underpinned by Moody’s expectation that continued progress on economic and institutional reforms will, over time, enhance India’s high growth potential and its large and stable financing base for government debt, and will likely contribute to a gradual decline in the general government debt burden over the medium term,” Moody’s said in a statement. “While a number of important reforms remain at the design phase, Moody’s believes that those implemented to-date will advance the government’s objective of improving the business climate, enhancing productivity, stimulating foreign and domestic investment, and ultimately fostering strong and sustainable growth,” Moody’s said. The global ratings agency, however, cautioned that high debt burden remains a constraint on the country’s credit profile.
Indian markets, including stocks, bonds and the rupee, rallied on Friday after Moody’s upgraded India’s sovereign bond rating. While government officials hailed the move as long overdue, some investors termed it a surprise given that India recently surrendered its status as the world’s fastest-growing major economy amid sweeping policy change. Well the ratings upgrade is really a good one for India. It seems good days are ahead for India .Why not?