Moody's upgrades India's sovereign bond rating for first time in 14 years

Violet Tucker
November 19, 2017

In what can be taken as an endorsement of Prime Minister Narendra Modi's ongoing structural reforms and something that can boost investment sentiment, worldwide rating agency Moody's Investor Services, on Friday, lifted India's sovereign rating by a notch to Baa2 from Baa3 after 13 years.

Moody's also changed the rating outlook to "stable" from "positive" saying the economic and institutional reforms pushed through by the government will help stabilize debt.

Finance Minister Arun Jaitley termed the move as "belated recognition" of reforms undertaken by the Government and said the reform agenda will continue with emphasis on higher spending on infrastructure and in rural areas.

"The reform program will thus complement the existing shock-absorbance capacity provided by India's strong growth potential and improving global competitiveness", it said.

A sovereign ratings upgrade of the Indian government's bonds and of some domestic industry majors from U.S. credit rating agency Moody's on Friday lifted the key Indian equity indices to their new intra-day record highs.

The markets were dominated by the bears for the last week before it made a comeback on Thursday, closing with a gain of more than 300 points.

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BSE index jumped by 235.98 points after this news came out; while Nifty closed 68.85 points up. In its biggest single-day surge in six weeks, the rupee gained 31 paise to end at a one-week high of 65.01 against the dollar. "India's largest ever increase in Ease of Doing Business rankings, Pew study ascertaining PM's popularity, Moody's upgrade are all reflections of Modi Govt's hard-work and reform process", Amit Shah, the president of the ruling Bharatiya Janata Party, said in a Twitter post. Moody's upgrade, its first since January 2004, moves India's rating to the second lowest level of investment grade. Whether or not it prompts an upgrade by rating agencies should be a secondary consideration.

Moody's expects GDP growth to moderate to 6.7 per cent in the fiscal year ending in March 2018.

"#Moody 's rating upgrade is a reaffirmation of improvement in India's economic fundamentals for long term sustainable growth".

Moody's improved rating for India means that investors can now have more confidence and more clarity regarding India's future, and they will be more open to investing there.

In a statement, it further said: "While India's high debt burden remains a constraint on the country's credit profile, Moody's believes that the reforms put in place have reduced the risk of a sharp increase in debt, even in potential downside scenarios".

Listing out the achievements, the Finance Minister said that India has become the fastest economy among the emerging nations and the country is going through strong fundamental changes.

Other reports by Guamnewswatch

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