Moody upgrades India's sovereign rating first time in 13 years

New Delhi : Despite India's domestic economic concerns, international rating agency Moody's has expressed confidence in Modi Government's policies. 

The international agency has upgraded India's local and foreign currency issuer ratings to Baa2 from Baa3 and changed the outlook on the rating to stable from positive. 

The agency has cited the government's implementation of  its reform programme which includes introduction of the Goods and Services Tax, Aadhaar system of biometric accounts and direct benefit transfer schemes and measures taken to address bad loans in the banking system.

The rating upgrade comes after a gap of 13 years - Moody's had last upgraded India's rating to 'Baa3' in 2004.

The immediate impact of the rating upgrade is that the cost of international borrowing will become cheaper for Indian government and Indian corporates whose ratings are constrained by the sovereign rating. Issuers of lower rated paper have to pay higher rates to make up for the perceived credit risk. The move will also improve the sentiment in the equity markets.