"Moody's has upgraded the government of India's local and foreign currency issuer ratings to Baa2 from Baa3 and changed the outlook on the rating to stable from positive", the global rating agency said in a release on Friday, adding that the government's wide-ranging economic and institutional reforms will improve the business climate and foster strong and sustainable growth.
President of industry chamber Ficci Pankaj Patel said the development underlines the fact that India is moving in the right direction.
Moody's Investors Service upgraded its ratings on India's sovereign bonds for the first time in almost 14 years on Friday, saying continued progress on economic and institutional reform will boost the country's growth potential. "Took more than a decade but is a big positive development for the Indian economy", he said in a tweet.
These measures increase the degree of formality in the economy, broaden the tax base (as with the GST), and promote expenditure efficiency through rationalisation of government schemes and better-targeted delivery (as with the DBT system) will support the expected, though very gradual, improvement in India's fiscal metrics over time, it said. HPCL said the firm would benefit from both lower borrowing costs and a stronger rupee.
The rating upgrade augurs well for inflows into the local bond market, which has already witnessed solid inflows in 2017. But some economists said an upgrade from the other big rating agencies seemed unlikely.
Congress leader Kapil Sibal on Saturday said the upgradation of India's rating by United States credit rating agency Moody's was not in sync with the "mood of the people". "The Reserve Bank should cut rates on December 6 to signal a lending rate cut before the busy season with inflation well under control", Sen Gupta said. Moody's had last upgraded India's rating to "Baa3" in 2004.
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With the government committed to fiscal consolidation, India might not have to wait for 13 long years for next sovereign upgrade by a rating agency, said a SBI report.
The benchmark BSE Sensex hit as high as 33,520.82 before paring gains to end the session up 235.98 points or 0.71 percent at 33,342.80.
Atul Pandey, Associate Partner, Khaitan and Co said the present government in last three years has carried out several economic regulatory reforms which has attracted more foreign investment and has also eased doing of business in India.
"Fiscal prudence has helped India to get Moody's upgrade", the finance minister said.
"The intent of Modi government is to continue with its reform agenda", he said. "The reform program will thus complement the existing shock-absorbance capacity provided by India's strong growth potential and improving global competitiveness", the rating agency said in a statement.
This is unedited, unformatted feed from the Press Trust of India wire.