Moody’s upgrades India rating, backs Modi govt reforms
Credit rating company Moody’s Investors Service on Friday upgraded India’s sovereign rating by a notch in a ringing endorsement of the Narendra Modi government’s reforms policy.
Moody’s raised the rating from the lowest investment grade of Baa3 to Baa2, and changed the outlook from stable to positive. It’s the first upgrade of India’s rating in 14 years.
Backing the reforms initiated by the government in the last three years, Moody’s said in a statement, “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.”
Popularly known as Modinomics, the economic policies, some of which like the demonetisation of high-value banknotes have caused disruption to the informal economy, have received flak from the political opposition, especially in the campaign underway for the Gujarat elections next month.
Not only will the Moody’s ratings upgrade deflect this criticism, it is likely to unleash a fresh round of foreign portfolio investments and make external commercial borrowings cheaper. The ratings agency, after the sovereign upgrade, revised the ratings for corporate entities too.
“Many who had doubts about India’s reform process would now seriously introspect on their position,” finance minister Arun Jaitley said in response to the upgrade.
Financial markets cheered the upgrade. The BSE Sensex ended at 33,342.80 points, up 235.98 or 0.71%, while the Nifty closed at 10,283.60, up 68.85 or 0.67%. The rupee closed at 65.02 per dollar, up 0.47% from its previous close.
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