India Sees Credit Rating Upgrade

Posted by Reading Time: 2 minutes

Jan. 17 – Moody’s Investor Services has upgraded its rating on India’s long-term government bonds denominated in the domestic currency from Ba l to Baa 3 (from speculative to investment grade). The long-term country ceiling on the overseas currency bank deposits was also upgraded from Ba l to Baa 3 (from speculative to investment grade). Also, Moody’s had upgraded the short-term government bonds denominated in the domestic currency from NP (not prime) to P-3 (from speculative to investment grade). This short-term rating had been upgraded for the first time since it was newly assigned in 1998.

Apart from this, there has been another upgrade by Moody’s with the short-term country ceiling on foreign currency bank deposits increasing from NP (not prime) to P-3 (prime: acceptable ability to repay short-term obligations).

In its Investors Services Global Credit Research released on December 20, 2011, Moody’s underlined some of the government’s efforts at fiscal consolidation by appreciating that the “[Government] eliminated petrol subsidies and changed the way fertilizer subsidies are calculated, which may yield some budgetary savings. There have also been initiatives on the revenue front involving simplification (and hence hoped-for improvements in compliance) of indirect and direct taxes.”

Moody’s promotion follows a positive rating action by Dominion Bond Rating Service (DBRS) which has been rating India’s debt since June 2007. In June 2011, they upgraded the trend of India’s long term foreign and local currency debt ratings for the first time from BBB (low) Negative to Stable outlook.

Likewise, in its June 2011 report, Fitch affirmed the credit ratings issued the year before and respected the management of the economy by India.

“India’s medium-term economic growth prospects remain strong, as potential GDP growth remains greater than 8 percent, well above the ‘BBB’- range median,” Fitch noted.

India’s sovereign debt is rated by six international sovereign credit rating agencies: namely Standard and Poor’s, Moody’s Investors Service, Dominion Bond Rating Service, Fitch Ratings, Japanese Credit Rating Agency, and Rating and Investment Information.

These agencies usually visit the Ministry of Finance and the Reserve Bank of India before making their credit assessment. DEA will continue to employ rating agencies on a regular basis to make an impression upon them as to the long-term structural strengths and sound fundamentals of the Indian economy.

Dezan Shira & Associates is a boutique professional services firm providing foreign direct investment business advisory, tax, accounting, payroll and due diligence services for multinational clients in India. For more information, please contact, visit, or download the firm’s brochure here.