Moody Investor services, for the first time since 2004 raised India’s sovereign rating from Baa3 to Baa2.
Moody’s says that the upgrades of rating that has been done after 13 years because of the welcome reforms like Goods and Services Tax, Monetary policies of the government, Recapitalization of Indian banks and Aadhaar biometric identification systems.
Moody’s have also changed the outlook on the rating from ‘positive’ to ‘stable’. “The decision to upgrade the ratings is underpinned by Moody’s expectation that continued progress on economic and institutional reforms will, over time, enhance India’s high growth potential, ” Moody’s Investor Services said in a statement today.
The financial reforms in the government policies prompted Moody to take such a step. “India has a large and stable financing base for government debt, and will likely contribute to a gradual decline in the general government debt burden over the medium term.” Moody’s further added.
Economic implications of the rating
The Indian Rupee has jumped almost by 1 percent to 64.67 per dollar. The yield on the 10-year sovereign bonds decreased by 11 basis points to 6.96 percent. The equity index rose by 1.3 percent.
Borrowing rates are going to get cheaper for government bodies. Foreign investors would look more favourably at the Indian market now. Moody’s said that there might be little distractions in the growth of India’s economy this year, but the future looks stronger. However, higher debt rate of the country is a cause for concern.
Government officials rejoice
The introduction of specific policies by the Government is the reason for the rating. The ruling party has been subjected to criticism for the economic slowdown of the country for some time now, so, this rating is a win for them in the wake of the upcoming Gujarat elections.