The agency announced that it was upgrading India's rating from Baa3 to Baa2 and changing its rating outlook to stable. This is Moody's first upgrade for India since January 2004 and places the country at the second-lowest investment grade, above Standard & Poor's and Fitch. The decision reflects confidence in Prime Minister Narendra Modi's government and recent reforms. Following the announcement, Indian stocks, bonds, and the rupee all saw gains. Lakshmi Iyer, head of fixed income at Kotak Mutual Fund, likened the news to receiving early Christmas presents. The upgrade in ratings is a positive development for bonds that were previously in a negative trend. This change is expected to result in lower yields across different time periods. Despite India's efforts to convince Moody's to upgrade its rating last year, the agency had concerns about the country's debt levels and weak banks. However, the recent upgrade is seen as a belated recognition of the government's efforts to improve the economy. Finance Minister Arun Jaitley described it as a victory for the government, while Modi's colleagues see it as another success for the prime minister following a recent survey showing high approval ratings for him among Indians. Some economists expressed skepticism about the possibility of other major rating agencies making similar upgrades soon. Radhika Rao from DBS pointed out that slower growth, a struggling rural sector, weak investment, and the threat of rising oil prices have all impacted the economy negatively. She believes Fitch and S&P are unlikely to upgrade India's ratings quickly due to their cautious approach and concerns about state and central government finances. Finance Minister Jaitley stated that the government remains committed to fiscal consolidation, aiming for a fiscal deficit of 3.2 percent of GDP in the current year and 3 percent in the following year. He stated that they would uphold financial discipline and expressed confidence that current policies would lead India to a more stable financial position. Moody's also raised the ratings of several top Indian banks and state-run energy companies, potentially reducing their borrowing costs. The markets reacted positively, with India's bond yield and currency strengthening, while the Mumbai stock index closed higher. However, debt traders cautioned that the rally may be short-lived due to high bond supply and concerns about inflation. A bond trader at a private bank questioned who would be brave enough to keep buying in the current market. Moody's stated that the introduction of the goods and services tax (GST) in India would increase productivity by eliminating barriers to trade between states. Marie Diron from Moody's explained that the upgrade was based on the potential positive impact of the GST reform on growth, despite concerns about a higher government deficit. While some market participants doubted the timing of the upgrade, Moody's predicted a slight decrease in India's GDP growth for the fiscal year ending in March 2018. Additionally, Moody's upgraded India's local currency debt ratings. Moody's stated that although several important reforms are still in their initial phases, it believes that the reforms already in place will help the government achieve its goals of improving the business environment, increasing productivity, and encouraging investment. Moody's also mentioned that India's long-term growth potential is much higher than that of most other Baa-rated countries.