NEW DELHI: Finance Minister Arun Jaitley said on Friday that US credit rating agency Moody's upgrading India's sovereign rating was an extremely encouraging international recognition of the structural reforms undertaken by the government including demonetisation, Goods and Services Tax (GST) and recapitalization of public sector banks.
"It is a belated recognition of all the positive steps taken in the last few years. It is a recognition and an endorsement of the process that India has undergone in the last three-four years where a number of structural reforms have placed India on a higher growth trajectory," he told reporters.
Moody's upgraded India's sovereign rating to Baa2 from its lowest investment grade of Baa after a gap of 13 years. It also upgraded India's local and foreign currency issues rating to Baa2 from Baa3.
Moody's has changed the outlook for the country's rating to stable from positive and said this was based on the Indian government's "wide-ranging programme of economic and institutional reforms".
Jaitley said the government had shown fiscal prudence through a series of steps in the last few years like demonetisation, introduction of Aadhaar, Insolvency and Bankruptcy Code, recapitalization of public sector banks and smooth transition to the GST that have led to better economic situation.
"The decision to upgrade the ratings is underpined by Moody's expectation that continued progress on economic and institutional reforms will, over time, enhance India's high growth potential and its large and stable financing base for government debt, and will likely contribute to a gradual decline in the general government debt burden over the medium term," a Moody's Investor Service release said.
Jaitely said: "Smooth transition of GST is universally recognised as a landmark reform in Indian tax structure. All these steps which constituted major reforms are directional in nature. All steps taken in the last few years had a roadmap.
"It is extremely encouraging that there is an international recognition after 13 years. This is not something that is happening in isolation.
"For three years we were doing a lot of structural reforms. Even we have moved up 30 places in World Bank's Ease of Doing Business. Now after a long spell of 13 years, India gets rating upgradation," the minister added.
The minister said that with the introduction of GST, market barriers had been removed. Also, demonetization had made the country less cash currency oriented and made it more digitised.
"Our track record for the last three years speaks for itself and we intend to move on that. We will maintain fiscal prudence," he added.
Chief Economic Adviser Arvind Subramanian, who was at the press meet, said the ratings upgrade was a welcome collateral for government actions.