Moody’s Investors Service reaffirmed the lowest investment grade rating—Baa3—for India with a positive outlook, holding that the reform efforts of the government were yet to accelerate private investment
The rating update comes days after S&P Global Ratings kept its sovereign credit rating for India unchanged at the lowest investment grade—BBB- with a stable outlook— and ruled out an upgrade till 2017-end.
India has long held that such ratings are inherently biased against emerging economies and has put in efforts to form a BRICS-level sovereign rating agency without success.
Moody’s said it continues to believe that economic and institutional reforms introduced by the government will ensure India’s growth outperforms its peers over the medium term and that further improvements in its macroeconomic and institutional profile will be achieved.
Moody’s upgraded India’s rating outlook to positive from stable in April 2015 to reflect continuous focus on reforms by the government.
Moody’s said it would consider an upgrade upon seeing evidence that institutional strengthening will elicit sustained macroeconomic stability, higher levels of investment, more favourable fiscal dynamics as well as additional policy measures.
Moody’s lauded the centre’s broad range of policy measures that are conducive to moderating inflation and limiting current account deficit.
However, Moody’s pointed out structural constraints to a rating upgrade such as lower per capita income of around $6,000 on a purchasing power parity basis, over-dependence on monsoon and high government debt.
Moody’s also pointed out that bad asset quality continues to pose sovereign credit risks. 

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