Moody's raises India to investment grade

NEW DELHI: Moody's has upgraded India's rating for short-term foreign currency bank deposits from speculative to investment grade after finance ministry sought clarity from the global rating agency.

The upgrade will help the country attract overseas deposits to fill up the void created by the sharp slowdown in equity inflows. Moody's had last month lifted foreign currency bank deposits to Baa3 from Ba1 and rating for domestic currency short-term government bonds to bonds to P-3 from NP but did not mention short term foreign currency bank deposit.

The Finance Ministry had approached the ratings agency seeking clarification regarding the 'shortterm country ceiling on foreign currency bank deposit', Thomas Mathew, joint secretary in the finance ministry told reporters.

Moody's has now lifted the shortterm country ceiling on foreign currency bank deposit from NP (not prime) to Prime (P-3), suggesting acceptable ability to repay short-term obligations.

The Reserve Bank of India had recently freed up interest rates on nonresident (NRE) deposits and ordinary non-resident (NRO) accounts in a bid to attract dollars from overseas Indians.

The revision in ratings will help increase investor comfort at a time India is battling high inflation, low growth, rising fiscal and current account deficit and low sentiment. Justifying the December upgrade, Moody's had said, "Diverse sources of Indian growth have enhanced its resilience to global shocks".

The ratings agency has sent a mail to the finance ministry affirming the upgrade. "The Department of Economic Affairs (DEA) will continue to engage ratings agencies on regular basis to impress upon them the long-term structural strengths and sound fundamentals of the Indian economy," Mathew said.

Six sovereign ratings agencies --Standard & Poor's, Moody's, DBRS, Fitch, Japanese Credit Rating Agency and the Rating and Investment Information Inc - currently have issued India ratings.

Source: EconomicTimes