Moody's upgrades India's rating, changes outlook to stable

MUMBAI: In a development that will give big boost to Modi government, reduce the cost overseas borrowing and improve investments in India, Global rating company, Moody's Investors Service has upgraded India’s sovereign rating to Baa2 from Baa3 and changed the outlook to stable from positive.

Rating company, while justifying the upgrade said that the reforms undertaken by the government will "improve the business climate, enhancing productivity, stimulating foreign and domestic investment, and ultimately fostering strong and sustainable growth."

Moody's has also pointed out that the reforms put in place have reduced the risk of a sharp increase in debt, even in potential downside scenarios.

Moody's said most of these measures such as GST and demonetisation, will take time for their impact to be seen and, have undermined growth over the near term.

However, as disruption fades, assisted by recent government measures to support SMEs and exporters with GST compliance, real GDP growth will rise to 7.5% in FY2018, with similarly robust levels of growth from FY2019 onward.

This year it expects real GDP growth to moderate to 6.7% in the fiscal year ending in March 2018.

It further said that in longer term, India's growth potential is significantly higher than most sovereigns.