In what has already energised the stock markets and may bring some cheer to India Inc. and the government, global rating agency Moody's has upgraded the country's rating of short-term foreign currency bank deposits from ‘speculative' to ‘investment' grade.
Since December 20 last year, this is the fourth upgrade by Moody's Investor Services, which is expected to help Indian banks and other entities in raising overseas deposits at finer rates. Earlier, the rating agency had upped the ratings of short-term and long-term government bonds, and long-term bank deposits.
Highlighting the announcement by Moody's here, evidently to cleanse the air of pessimism in the current economic environment, the Finance Ministry, in a statement, said: “…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).”
As per the ratings scale, ‘P-3' denotes acceptable ability to repay short-term obligations. This upgrade has come in less than a month after Moody's had notched up the credit rating of Indian government bonds from speculative to investment grade and also upgraded short-term government bonds denominated in domestic currency from NP to P-3.
Alongside, the rating agency had also upgraded the long-term government bond denominated in domestic currency from ‘Ba1' to ‘Baa3' – a move from speculative to investment grade. The long-term country ceiling on foreign currency bank deposit was also upgraded from Ba1 to Baa3. Quoting the rationale for the upgrade by Moody's, the Finance Ministry said: “In its Investors Services Global Credit research (released on 20th December, 2011), Moody`s has 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.”
