Indian stocks surge on Moody's first upgrade in 14 years

Indian stocks surge on Moody's first upgrade in 14 years

The rating agency also said that India's growth potential is significantly higher than the most other baa rated sovereigns.

In a significant boost to the Modi government's reform agenda, which has faced flak in recent weeks following a growth slowdown, Moody's Investors Service cited these very measures to upgrade India's sovereign rating a notch and changed the outlook to positive from stable.

In the wake of India's rating being upgraded by global credit rating agency Moody, Finance Minister Arun Jaitley said it is "encouraging to gain worldwide recognition and not something that's happening in isolation".

"The decision to upgrade the ratings is underpinned by Moody's expectation that continued progress on economic and institutional reforms will, over time, enhance India's high growth potential and its large and stable financing base for government debt, and will likely contribute to a gradual decline in the general government debt burden over the medium term", the agency's press release says. "It is a belated recognition of the positive steps taken in the past few years. It is a major worldwide recognition of major economic and institutional reforms undertaken by the Government of India", he said while addressing a press conference here.

The agency said the reforms initiated by the Indian government could improve the business climate, productivity, stimulating foreign and domestic investment, and hence fostering strong and sustainable growth. While GST and demonetisation have undermined growth over the near term, real GDP growth will rise to 7.5 per cent in 2018- 19 as disruption fades, it said. HDFC Chairman Deepak Parekh said, "I've always felt India's rating was far below than what it should be". The Narendra Modi government has been pitching for an upgrade for quite some time now citing various reforms initiatives.

The rating upgrade comes after a gap of 13 years. 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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