Moody's upgrades India's sovereign rating to Baa2 from Baa3

International rating agency Moody's Investors Services has upgraded India's sovereign rating for the first time in nearly 14 years, saying the country was poised for fast growth because of wide-ranging economic and institutional reforms by Prime Minister Narendra Modi's government.

Moody's today said it has upgraded the government of India's local and foreign currency issuer ratings to Baa2 from Baa3 and changed the outlook on the rating to stable from positive.

The upward revision in India's sovereign rating comes 13 years after it was last upgraded in January 2004 to Baa3 from Ba1.

The Narendra Modi government welcomed the upgrade, saying that as rightly noted by the Moody's, this is in recognition of major economic and institutional reforms undertaken by Government of India.

The government said it is a recognition of path-breaking reforms, including introduction of the Goods and Services Tax (GST); putting in place a sound monetary policy framework; measures taken to address recapitalisation of public sector banks and a number of measures taken to bring formalisation and digitalisation (The JAM agenda) in the economy - demonetisation, the Aadhaar system of biometric accounts and targeted delivery of benefits through the Direct Benefit Transfer (DBT) system.

The government sees it as an endorsement of its ''commitment to macro stability which has led to low inflation, declining deficit and prudent external balance and fiscal consolidation programme which has resulted in a reduction of fiscal deficits from 4.5 per cent of GDP in 2013-14 to 3.5 per cent in 2016-17 and its consequential sobering impact on general government debt.''

Finance minister Arun Jaitley, meanwhile, said the government intends to stay the course on fiscal consolidation in the medium term.

''We believe that it is a belated recognition of all the positive steps which have been taken in India in the last few years, which has contributed to strengthening of Indian economy,'' finance minister Arun Jaitley told a press conference. ?

''Many who had doubts about India's reform process would now seriously introspect on their position.''

Shortly after the announcement, Modi led a chorus of ministers and policymakers who tweeted their reaction to the upgrade.

''Moody's believes that the @narendramodi government's reforms will improve business climate, enhance productivity, stimulate foreign and domestic investment, and ultimately foster strong and sustainable growth,'' Modi tweeted.