After a gap of 13 years, the US-based Moody's on Friday upgraded India's sovereign credit rating by a notch to "Baa2" with a stable outlook citing improved growth prospects driven by economic and institutional reforms.
Upgradation of India's credit rating by Moody's is a big news, because it has been done after 14 years, and done at a time when business analysts and observers are severely questioning PM Modi's decisions to implement GST and ban 80% of currencies overnight.
The "Baa3" rating was the lowest investment grade - just a notch above "junk" status.
"Recognising India's growth enhancing reforms under PM, Moody's has upgraded India's sovereign rating for the first time since 2004. More importantly, it also emboldens the government to stay true to the path of strong and transformational reforms in the coming days", he added.
"Good news for the industry", Jindal said.
The rating upgrade by Moody's will help Indian corporates to reduce their borrowing costs in the medium term as it will lower the risk premium for the companies.
Terming the ratings upgrade by Moody's as a "positive measure", SBI (State Bank of India) chairman Rajnish Kumar said it will make foreign funds cheaper for both corporates as well as his bank. 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. "Entire world is recognising "Sabka Saath, Sabka Vikas" Railways and Coal Minister Piyush Goyal said in a tweet.
The Government "is going to do what it has to do on the domestic front - employment growth, economic growth, reviving investment", said Chief Economic Advisor Arvind Subramanian. "The reform program will thus complement the existing shock-absorbance capacity provided by India's strong growth potential and improving global competitiveness", the rating agency said in a statement.
Hailing the decision, he said that the government has become extremely encouraged over the upgraded rating.
It, however, said the high public debt burden remains an important constraint on India's credit profile relative to its peers, notwithstanding the mitigating factors which support fiscal sustainability.
Measures such as demonetisation, the Aadhaar system of biometric accounts, and targeted delivery of benefits through the direct benefit transfer (DBT) would reduce informality in the economy, it said.
Moody's pegged GDP growth at 6.7 per cent in FY18 and 7.5 per cent in FY19, with similarly robust levels of growth from FY20.
Key steps that are yet to fructify include planned land and labour market reforms, which rely to a great extent on cooperation with and between states, Moody's said.
However, challenges with implementation of GST, ongoing weakness of private sector investment, slow progress with resolution of banking sector asset quality issues and lack of progress with land and labour reforms at the national level remain, it said.
Nifty Bank hit a fresh record high on Moody's changing the outlook on the rating to stable from positive.