Moody's also upgraded India's local currency senior unsecured rating to Baa2 from Baa3 and its short-term local currency rating to P-2 from P-3. India's sovereign credit rating was last upgraded in January 2004 to Baa3 (from Ba1).
"This change is a positive for the rupee and India in the medium term as it lends credibility to the ongoing reform agenda which should support inflows, ameliorating some concerns over current account-deficit financing", Nomura said in a report.
Finance Minister Arun Jaitley called the upgrade "a belated recognition of all the positive steps which have been taken in India in the last 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. "While a number of reforms remain at the design phase, Moody's believes that those implemented to date will advance the government's objective of improving business climate, enhancing productivity, stimulating investment, and ultimately fostering strong and sustainable growth", it added. "The rating agency too has now confirmed it formally, which is welcome".
The Indian Rupee soared as much as 1 percent on Friday after the Moody's Investor Services upgraded the nation's sovereign rating on optimism that foreign fund flows - both direct investment and portfolio, would accelerate.More news: Google Assistant Support Comes To ecobee Smart Home Products
The Congress was quick to dismiss India's improved rating.
Moody's pegged GDP growth at 6.7 per cent in FY18 and 7.5 per cent in FY19, with similarly robust levels of growth from FY20.
India's credit rating upgrade by Moody's is a reflection of the country's growth story, Niti Aayog Vice Chairman Rajiv Kumar said on Friday, and expressed hope that other global agencies such as S&P and Fitch would follow suit. The Narendra Modi government has been pitching for an upgrade for quite some time now citing various reforms initiatives. Earlier, the outlook was positive but on a lower rating, which indicated there were more chances of an upgrade than downgrade.