Moody’s Investors Service (“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. India’s rating has been upgraded after a period of 13 years. India’s sovereign credit rating was last upgraded in January 2004 to Baa3 (from Ba1).

Mr. Parthasarathi Mukherjee, MD & CEO, Lakshmi Vilas BankMr. Parthasarathi Mukherjee, MD & CEO, Lakshmi Vilas Bank said, “The latest rating action by Moody’s is obviously very welcome. I expect that this is a recognition of the way the economy has reacted to many of the steps taken by the Government. Clearly, it indicates that the reforms are seen as effective. I wouldn’t be surprised if the others also follow this trend. I think that this will give a shot in the arm to the markets, in general. However, I am not sure that this will significantly reduce spreads for India’s overseas borrowings as the markets have already been pricing India’s spreads at levels narrower than what her rating indicated.”

Government of India welcomes the upgrade and believes, as rightly noted by the Moody’s that this is in recognition of major economic and institutional reforms undertaken by Government of India. These reforms include introduction of path breaking Goods and Services Tax (GST); putting in place a sound monetary policy framework; measures taken to address recapitalization of public sector banks and a number of measures taken to bring formalization and digitalisation (The JAM agenda) in the economy – demonetization, the Aadhaar system of bio metric accounts and targeted delivery of benefits through the Direct Benefit Transfer (DBT) system.

Moody's Investors ServiceMoody’s have also rightly recognized the Government’s commitment to macro stability which has led to low inflation, declining deficit and prudent external balance and Government’s fiscal consolidation programme which has resulted in a reduction of fiscal deficits from 4.5% of GDP in 2013-14 to 3.5% in 2016-17 and its consequential sobering impact on general government debt. Government intends to stay the course on fiscal consolidation in the medium term.

India's Rating Upgraded- Moody's

Source- PIB

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