The agency announced an upgrade in India's rating from Baa3 to Baa2, changing the outlook to stable from positive due to balanced risks to India's credit profile. This marks Moody's first upgrade of India since January 2004, placing the rating at the second-lowest investment grade, one notch above Standard & Poor's and Fitch. The decision reflects positively on Prime Minister Narendra Modi's government and the reforms it has implemented. Following the announcement, Indian stocks, bonds, and the rupee experienced a rally, with experts like Lakshmi Iyer from Kotak Mutual Fund comparing the situation to Santa Claus delivering gifts. The upgrade in ratings is a positive development for bonds that were previously facing a negative trend. This change is expected to result in a decrease in yields across different time periods. India had strongly advocated for an upgrade from Moody's last year, but was unsuccessful due to concerns about debt levels and the stability of banks. Despite criticism of its rating methodology, Moody's stood firm. Finance Minister Arun Jaitley views the upgrade as a recognition of the government's efforts to improve the economy. Prime Minister Modi's associates see it as another success for him, following a recent survey showing high approval ratings among Indians. Some economists believe that other major rating agencies such as Fitch and S&P are unlikely to upgrade India's credit rating soon, as they have expressed concerns about weak government finances and the slowing economy. Radhika Rao of DBS stated that reforms, a weak rural sector, and low investment have hindered growth, while rising oil prices pose risks. Finance Minister Jaitley has confirmed that the government will continue with fiscal consolidation, aiming for a fiscal deficit of 3.2 percent for the current year and 3 percent for the next. He stated that the fiscal discipline will be maintained and expressed confidence that current policies will help India move towards a stronger financial position. Moody's upgraded the ratings of several top Indian financial institutions and state-run energy companies, potentially reducing their borrowing costs. The Indian markets saw a surge, with the benchmark 10-year bond yield dropping to 6.94 percent before ending at 7.05 percent, the rupee strengthening to 65.02 per dollar, and the Mumbai stock index closing 0.67 percent higher. However, debt traders warned that due to heavy bond supply and a hawkish inflation outlook, the rally may not last long. A bond trader at a private bank questioned who would be brave enough to continue 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 inter-state trade. Marie Diron, an associate managing director at Moody's, mentioned that the upgrade took into consideration the potential impact of the GST reform on growth. Despite accounting for a higher government deficit, Moody's believes there is a commitment to fiscal consolidation in the long run. However, some market participants raised concerns about the timing of the upgrade, questioning the government's fiscal discipline. Moody's expects India's real GDP growth to decrease to 6.7 percent in the fiscal year ending in March 2018. Additionally, the agency upgraded India's local currency senior unsecured debt rating to Baa2 and its short-term local currency rating to P-2. Moody's stated that even though some important reforms are still in the early stages, it is confident that the ones already in place will help the government achieve its goal 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 other Baa-rated countries.