Published: Sun, November 19, 2017
Markets | By Rosalie Gross

Moody's upgrades India's sovereign bond rating for first time in 14 years

Moody's upgrades India's sovereign bond rating for first time in 14 years

Moody's also upgraded ratings for a slew of public sector companies - State Bank of India, Export Import Bank of India and Indian Railways Finance Corporation - and the private sector lender HDFC Bank on Friday.

Moody's Corporation, also known as Moody's, is a 108 year old financial services company from US, which provides credit rating for countries based on their economic growth. Jaitley said that the Moody's rating is an endorsement of the economic reforms introduced by the Prime Minister Narendra Modi led government. But, the momentum failed to carry on as investors rushed in to shave profit as the index closed the day at 33,342.80, up 235.98 points - or 0.71 per cent.

The government is mid-way through a wide-ranging programme of economic and institutional reforms, the global ratings agency said in a statement on Friday, mentioning GST, improvements to the monetary policy framework, and measures to address bad loans of banks. Also, if foreign investors were willing to pour money into India without bothering much about Moody's - the other major agency, Standard & Poor's, incidentally, hasn't changed its sovereign rating from "BBB-" (lowest investment grade) since January 2007 - how does any upgrade or downgrade matter?

Meanwhile, the markets cheered the latest development with BSE's Sensex and 50-share Nifty closing with a more than 50 basis points (bps) gains.

"Moody's believes that those (reforms) implemented to date will advance the government's objective of improving the business climate, enhancing productivity, stimulating foreign and domestic investment, and ultimately fostering strong and sustainable growth".

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In step with India rating upgrade, Moody's Investors Service today upgraded issuer ratings of nine state-owned firms, including oil producer ONGC, refiners IOC, BPCL and HPCL, power generator NTPC and gas utility GAIL.

"India's largest ever increase in Ease of Doing Business rankings, Pew study ascertaining PM ji's popularity, Moody's upgrade are all reflections of Modi Govt's hard-work and reform process", tweeted Bharatiya Janata Party (BJP) President Amit Shah. Recognition for recent economic reforms in India & 5000 year track record of no default. Whether or not it prompts an upgrade by rating agencies should be a secondary consideration.

Moody's also expected the real GDP growth to moderate to 6.7% in the fiscal year ending in March 2018. "Longer term, India's growth potential is significantly higher than most other Baa-rated sovereigns", it said.

The rating which has come after a gap of nearly 13-years is a sentiment booster and positive for flows into equities and debt market. Earlier, the outlook was positive but on a lower rating, which indicated there were more chances of an upgrade than downgrade.

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