India’s first sovereign upgrade by Moody’s Investors Service, from Baa3 to Baa2, marks a long pending shift - as economists and analysts point out, the rating upgrade has been overdue, in the light of the multiple reform cycles India has been through in the past decade and a half. China's Moody's rating in comparison, is A1. India would have to go up two more grades - the next higher is Baa1 - for the country to reach the grades that Moody's considers highly investment friendly economies, from A3 and up.  

Moody's overall report card on the Indian economy was optimistically cautious. It points out that India is "midway through important structural and economic reforms". It pointed to GST, monetary polict improvements, the Aadhaar framework and direct transfers of benefits as key reasons for the upgrade. Interestingly, Moody's also mentioned demonetization - which has got a bad beating among Indian economists as not having boosted India significantly.

Moody's focus, it said, is on the long term - "measures like GST have undermined growth over the near term", it said, but will boost growth over the longer period. Indian analysts as well as superstar investor Rakesh Jhunjhunwala hailed the move, with some saying that the upgrade served as Modi's response to his critics. Politically, it remains to be seen how the government's recent moves play out in upcoming state elections, with effects of GST and demonetization having significantly impacted India's SME and informal economy. 

Photo: Samuel Zeller