Moody's Investors Service ("Moody's"), the global credit rating agency, today 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.
In addition, Moody's also upgraded India's local currency senior unsecured rating to Baa2 from Baa3 and its short-term local currency rating to P-2 from P-3.
Moody's has also raised India's long-term foreign-currency bond ceiling to Baa1 from Baa2, and the long-term foreign-currency bank deposit ceiling to Baa2 from Baa3. The short-term foreign-currency bond ceiling remains unchanged at P-2, and the short-term foreign-currency bank deposit ceiling has been raised to P-2 from P-3. The long-term local currency deposit and bond ceilings remain unchanged at A1.
“This is great news for the Indian economy as well as businesses which will be able to borrow at lower costs,” says Bhim D. Asdhir, President & CEO of Excel Funds Management Inc. “Indian bonds will also get huge boost, benefitting the Excel India Balanced Fund,” he adds.
According to a release from Moody’s, the decision to upgrade the ratings is underpinned by its’ expectation that “continued progress on economic and institutional reforms will, over time, enhance India's high growth potential and its 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 believes “that the reforms put in place have reduced the risk of a sharp increase in debt, even in potential downside scenarios.”
It recognizes that government efforts to reduce corruption, formalize economic activity and improve tax collection and administration, including through demonetization and the GST, should contribute to the further strengthening of India's institutions. On the fiscal front, efforts to improve transparency and accountability are expected to enhance India's fiscal policy framework and strengthen policy credibility.
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