Global ratings major Moody’s Investors Service upgraded India’s local currency government bond rating by one notch to ‘Ba1’ from ‘Ba2’, but left it just below the investment grade, ‘Baa3’. The move signifies greater confidence in the economy and is expected to give more comfort to foreign investors and funds looking to invest in India. This could also strengthen the rupee against other currencies and bring in more foreign capital. Moody’s also left the outlooks on the local currency rating and the foreign currency sovereign rating unchanged at ‘positive’ and ‘stable’, respectively. This comes at a time when a number of European nations are facing sovereign ratings downgrades due to weak economic condition. The move by Moody’s, although seen as long overdue by analysts, has a silver lining. The release from the ratings major said that if the inflationary pressure in India eases and the government is able to improve the current fiscal situation, Moody’s will consider upgrading India’s local currency ratings to ‘Baa3’, the same rating its foreign currency enjoys. “These developments would underpin the government’s structural reform programme and improve its local currency creditworthiness,’’ the Moody’s release said. Moody’s said there were four major reasons for the upgrade, the most important being a wide range of “institutional and structural reforms whose deepening, over time, will result in gradual improvements in the government’s financial strength, support fiscal credibility, and improve economic resilience.’’
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