Yesterday Moody’s upgraded India’s local and foreign currency issuer ratings to BAA 2 from BAA 3 and changed the outlook on the rating to stable from positive.
The upgrade which come after a gap of 13 years (last upgraded to BAA 3 in 2004) is accompanied with raise in India’s long-term foreign-currency bond ceiling to Baa1 from Baa2, and the long-term foreign-currency bank deposit ceiling to Baa2 from Baa3. The short-term foreign-currency bond ceiling remains unchanged at P-2, and the short-term foreign-currency bank deposit ceiling has been raised to P-2 from P-3.
The government has welcomed the step. Union Minister Piyush Goyal tweeted:
Recognising India’s growth enhancing reforms under PM @narendramodi, Moody’s has upgraded India’s sovereign rating for the first time since 2004. Entire world is recognising “Sabka Saath, Sabka Vikas”.
— Piyush Goyal (@PiyushGoyal) November 17, 2017
The Indian Equity markets are cheering the upgrade as it would cut costs of international borrowing for government or corporate alike. The lower rates for such borrowing may also provide ripple rate for domestic rates to be cut, thereby igniting the economic engines of growth.
The rating can be seen as a boost for the government facing harsh criticism over demonetization and botched roll out of GST. The rating agency seemed to agree with our opinion that the two decisions have enabled India to be on a high growth trajectory in a long term, however implementation of such high impact policies leaves much to be desire in the immediate term.
