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New Delhi - Moody's Investors Service on said it could upgrade India's rating if the government's reform agenda is implemented and key macroeconomic indicators like inflation remain under control over the next year.

"India's rating could be upgraded if Moody's expectations of gradual but credit positive reforms are realised in actual policy implementation and if the recent improvement in inflation, fiscal and current account ratios is sustained," it said.

Reuters
Moody's has a 'Baa3' rating on India with a positive outlook. Since 2004, Moody's has rated India at 'Baa3', the lowest investment grade, just a notch above 'junk' status.

"The rating could be upgraded if the above expectations are reflected in policy progress and macroeconomic indicators over the next year, and if we view this progress as sustainable," it said in a report on the Indian Government.

Moody's said the positive outlook is based on the expectation of implemented policies which are likely to lower sovereign credit risk by stabilising inflation, improving the regulatory environment, increasing infrastructure investment while maintaining the ongoing improvement in fiscal ratios.

It, however, cautioned that the rating outlook would likely return to stable "if there is a slowdown in or reversal of the policy reform process; if banking system metrics continue to weaken, or, if there is a decline in foreign exchange reserves coverage of external debt and imports".

Moody's said that lower oil prices as well as tighter fiscal and monetary policies have helped restore macro-economic balance.

"As a commodity importer, India benefits from a low commodity price environment, and its reliance on domestic demand for GDP growth shields the economy somewhat from the subdued outlook for global growth," it said.