Moody’s upgrades India’s sovereign rating to Baa2 with stable outlook

Moody’s Investors Service upgraded India’s sovereign rating today to Baa2 from Baa3 with a stable outlook. This upgrade puts Moody’s one notch ahead of Fitch and S&P, which currently has India on BBB- (stable), noted ANZ in a research report.

Even if recent economic reforms have seen near-term negative growth impacts, there have been some benefits. In the latest World Bank’s ease of doing business ranking, India moved up 30 places to 100th, while the Moody’s upgrade is another validation of the government’s reforms.

The policymakers in India are expected to carry on with pushing forward with structural reforms. The resolution of bank non-performing assets would be of supreme significance to revive the investment cycle and economic growth, stated ANZ.

The rating upgrade augurs well for inflows into the local bond market, which has already witnessed solid inflows in 2017. Additional inflows might help aid in the Indian rupee.

“However, we remain watchful of the government’s fiscal consolidation path post-GST and the upcoming state election results, which could impact the rupee in the short term”, added ANZ.

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