New Delhi: The international rating agency Moody’s on Friday upgraded India's sovereign credit rating on the optimism that the recent reforms measures introduced by the Modi government would spur economic growth.
It is after 13 years that Moody’s has upgraded country’s sovereign rating.
This is a major back-to-back victory for the Narendra Modi government after the World Bank recently upped India’s ranking by 30 places to 100 in the Ease of Doing Business.
Finance minister Arun Jaitley said Moody’s decision was a “belated recognition” of the steps the government had taken to fix the economy. “I am sure that many who had doubts would now seriously introspect on their own positions,” Mr Jaitley said in a jibe at critics of the government’s reforms agenda.
He said the Modi government’s performance over the last three years had been among the better ones in history as far as fiscal discipline was concerned. “We intend to move on that track,” added Mr Jaitley.
Moody’s upped India’s rating to Baa2 from Baa3 and changed its rating outlook to ‘stable’ from ‘positive’. It had last upgraded India in 2004. In 2015 it had changed the rating outlook to ‘positive’ from ‘stable’.
What it means
Upgrade will boost foreign capital inflows, lead to overseas borrowings at better rates.
The rating action may act a catalyst for investors eyeing India.
How it works
Sovereign rating is issued to national governments and a barometer of the country’s investment climate.
Baa rating is medium-grade and subject to moderate credit risk, 2 indicates mid-range ranking.
Where India stands
India has become the largest economy among Baa2-rated sovereigns.
In September, S&P Global Ratings cut China’s long-term sovereign credit rating by one level to ‘A+’ from ‘AA-’. Moody’s in May downgraded China to A1 from Aa3 and changed outlook to stable from negative.
