The agency has upgraded India's rating to Baa2 from Baa3 and changed the rating outlook to stable from positive, citing balanced risks to India's credit profile. This upgrade, the first by Moody's since January 2004, puts India at the second-lowest investment grade, above Standard & Poor's and Fitch. The decision by Moody's is seen as a recognition of Prime Minister Narendra Modi's government and its reforms. Just weeks after India moved up 30 places in the World Bank's ease of doing business rankings, Indian stocks, bonds, and the rupee all saw gains. Lakshmi Iyer, head of fixed income at Kotak Mutual Fund, likened the situation to Santa Claus delivering early gifts. The upgrade in ratings is a positive development for bonds that were previously in a negative trend. This improvement is expected to result in lower yields across various time periods. India had pushed hard for an upgrade from Moody's last year, but was unsuccessful due to concerns about debt levels and banks. Despite government criticism, the agency did not change its rating methodology. Finance Minister Arun Jaitley sees the upgrade as a recognition of the government's efforts to improve the economy. Prime Minister Modi's colleagues view it as another success for him, especially following a recent survey showing high approval ratings for him among Indians. Some economists believe that other major rating agencies, such as Fitch and S&P, are unlikely to upgrade India's rating soon. Radhika Rao from DBS pointed out that slow growth, a struggling rural sector, weak investment, and increased oil prices are posing risks to the economy. She mentioned that Fitch and S&P have expressed concerns about the financial situations of state and central governments. Jaitley, the finance minister, stated that the government will continue with fiscal consolidation, aiming for a fiscal deficit of 3.2 percent of GDP for the current fiscal year, and 3 percent for the following year. He stated that they will continue to adhere to fiscal discipline and expressed confidence that current policies will help India improve its financial position. Moody's upgraded the ratings of several Indian banks and energy companies, as well as the National Highways Authority of India, which could reduce their borrowing costs. The bond yield and the value of the rupee improved, and the stock market in Mumbai closed higher. However, debt traders warned that due to increased bond supply and inflation concerns, the market rally may not last long. A bond trader at a private bank questioned who would be brave enough to continue purchasing in the current market. Moody's stated that the introduction of the goods and services tax in India would increase productivity by eliminating barriers to trade between states. Marie Diron from Moody's said the upgrade considered the potential impact of the tax reform on growth. Moody's also took into account a higher government deficit, believing in the government's commitment to fiscal consolidation. However, some market participants expressed doubts about the timing of the upgrade, with concerns about the government's fiscal discipline. Moody's predicted India's GDP growth to decrease to 6.7 percent in the fiscal year ending in March 2018, compared to 7.1 percent the previous year. The agency also upgraded India's local currency senior unsecured debt rating to Baa2 from Baa3 and its short-term local currency rating to P-2 from P-3. Moody's stated that although some important reforms are still in the early stages, the ones already in place are expected to help the government achieve its goal of improving the business environment, increasing productivity, and encouraging investment. Moody's also mentioned that in the long run, India's growth potential is much higher than that of most other Baa-rated countries.