Moody's upgrades India's debt rating

Despite slowing industrial growth and high inflation, credit rating agency Moody's Investor Service has upgraded India's sovereign debt rating from Ba1, a speculative grade, to Baa3, which is investment grade.

The measures likely to be announced by December-end include relaxation in the lock-in and residual maturity norms for investments in the infrastructure sector, according to a Moody's official.

The lock-in period and the residual maturity are expected to be reduced to one year for all infrastructure investments.

"India's Baa3 rating incorporates credit strengths such as a large, diversified economy, robust medium term growth prospects and a strong domestic savings pool that facilitates the financing and refinancing of the government's relatively high debt burden," the ratings agency said in a statement.

Tellingly, it added, "It also encompasses credit challenges such as wide and persistent fiscal deficits, a policy process often hamstrung by domestic politics, susceptibility to inflationary pressures, and the limitations that poor social and physical infrastructure place on growth."

Moody's upgraded the rating on long-term government bonds denominated in domestic currency and long-term country ceiling on foreign currency bank deposits, both, from Ba1 to Baa3.