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Expressing optimism over India’s rating, Moody's Investors Service has said it will upgrade the country’s rating if there is an increase in growth potential and sustained decline in government debt. The rating agency had raised India's sovereign rating outlook to 'stable', from 'negative', while affirming the 'Baa3' rating - which is the lowest investment grade, just a notch above junk status. Moody's Investors Service Senior Vice President, Sovereign Risk Group, Christian de Guzman said that the 'stable' outlook reflects the view that it would take about 12-18 months for Moody's to upgrade India's sovereign rating.

Guzman said ‘We have stated that an increase in India's growth potential - which has eroded in recent years - and a sustained decline in the government debt burden along with a concurrent improvement in debt affordability could lead to an upgrade. Our stable outlook reflects the view that these triggers will not be met over the next 12 to 18 months’. While affirming sovereign rating, Moody's had said that a recovery is underway in the Asia's third-largest economy with downside risks to growth from subsequent coronavirus infection waves getting mitigated by rising vaccination rates.

Moody's expects India's real GDP to surpass 2019 levels this fiscal year (April 2021 to March 2022), rebounding to a growth rate of 9.3 per cent followed by 7.9 per cent in the next financial year. The Indian economy contracted 7.3 per cent in last fiscal ended March 31, 2021. The US-based rating firm had in 2020 lowered India's rating from 'Baa2', with a 'negative' outlook saying there would be challenges in policy implementation amid low growth and deteriorating fiscal position.