Moody's upgrades India's sovereign rating

New Delhi: After a gap of 13 years, global rating agency, Moody’s Investors Service has upgraded India’s sovereign rating, citing continued progress in the nation’s economic and institutional reforms.

The rating agency, upgraded India’s rating to Baa2 from Baa3. The outlook on the rating changed from ‘stable’ to positive.

Moody’s said reforms being pushed by the government will help stabilise debt and enhance the country’s growth potential.

Prime Minister Narendra Modi’s government has rolled out a string of reforms such as the GST, a new monetary policy framework, measures to check the banking sector’s bad loans ratios, demonetisation, Aadhaar biometric system, and the Direct Benefit Transfer system. These reforms will reduce informality in the country, Moody’s report said. The rating agency noted that the recently introduced GST will promote productivity by removing barriers to interstate trade.

Most of the reforms implemented by the government have been met with debates, especially GST, demonetisation and Aadhaar. The first two have led to short term disruptions in the economy. Moody’s acknowledged the short term weakness in the economy, stating that it expects real GDP growth to moderate to 6.7 percent in the fiscal year ending in March 2018.

However, as disruption fades, India’s GDP growth will rise to 7.5 percent, Moody’s said.

Within minutes of upgrade, the Government’s Chief Economic Advisor Arvind Subramanian tweeted, “Moody’s India rating upgrade. 1. Welcome. 2. Long overdue as our analysis here showed: //indiabudget.nic.in/es2016-17/echap01.pdf …. 3. Recognition of reforms: GST, bank recap plan, Bankruptcy code & macro-stability. 4. Govt. focus on domestic objective”.

Stock markets gave a thumbs up to the rating upgrade with the Sensex opening 282 points higher at 33,388 and the Nifty rising 110 points. The rupee went up sharply against the dollar at 64.67.