Moody's expects that India will record the GDP growth of around 7.5 per cent in 2015 and 2016.
Although, Moody's expects that global and domestic factors, including potential shocks in agriculture, could keep India's growth below trend for the next few quarters.
Some banks called the Moody's move backward looking, arbitrary and unwarranted.
India's fiscal deficit and inflation outlook could prevent any upgrades in the country's sovereign rating, even as the economy is headed for recovery
The global ratings agency, however, cautioned that high debt burden remains a constraint on the country's credit profile.
Using the debt-to-GDP ratio as a fiscal anchor aligns with efforts to promote fiscal transparency through proper disclosure of off-budget borrowings.
The note was authored by Faraz Syed, an associate economist with Moody's Analytics.
S&P Global Ratings on Wednesday upgraded India's sovereign rating outlook to positive from stable while retaining the rating at 'BBB-' on robust growth and improved quality of government expenditure. S&P said it could upgrade India's sovereign rating in the next 2 years if the country adopts a cautious fiscal and monetary policy that diminishes the government's elevated debt and interest burden while bolstering economic resilience.
The revision was announced before Indian markets opened on Thursday.
Moody's said fiscal measures undertaken by the government -- such as corporate tax rate cuts, bank recapitalisation, infrastructure spending plans, support for the auto sector and others -- do not directly address widespread weakness in consumption demand, which has been the chief driver of the economy. In addition, interest rate cuts by the Reserve Bank of India are not being adequately transmitted to lending rates because of the credit squeeze caused by disruption in the non-bank financial sector, it said.
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Moody's Investors Service, while silent on the sovereign rating on the higher-than-expected fiscal deficit numbers, expressed doubts over attaining the higher revenue targets and divestment realisation as assumed in the Budget. The Union Budget 2021-22 has pegged a fiscal deficit of 9.5 per cent for the current financial year as against the consensus 7 per cent, and 6.8 per cent for 2021-22 with a market borrowing of around Rs 12 lakh crore. It also assumes Rs 1.75 lakh crore to be scooped up from divestment.
Revision in the context of an ongoing global review affecting financial institutions: Moody's
Moody's expected economic activity to pick up in 2020 and 2021 to 6.6 per cent and 6.7 per cent, respectively.
The Modi administration has been unable to initiate key reforms.
The RBI said there is an upward bias on inflation projection.
Moody's Analytics had said Prime Minister Narendra Modi must keep BJP members in check or risk "losing domestic and global credibility".
Top seeds Wesley Moodie and Rik de Voest of South Africa beat second seeds Rohan Bopanna and Aisam Qureshi 6-4, 7-6 (4) in the final of the US $50,000 ATP Challenger in New Delhi on Friday.
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Central bank Governor Raghuram Rajan drew kudos from Moody's Analytics for his monetary stance.
The ministry sought to allay the rating agency's concerns and said economic growth was on an upward swing.
'Modi must keep his members in check or risk losing domestic and global credibility,' Moody's warned.
Earlier this month, Parliament approved the Insolvency and Bankruptcy Code, 2016.
Despite the increased business risks, the rating agency affirmed Baa2 ratings, three notches down from the highest grade, with a stable outlook for RIL, Moody's Investor Service said in its weekly outlook.
Top losers in the Sensex pack included Sun Pharma, Vedanta, ONGC, TCS, HUL, ITC, NTPC, Asian Paints and Infosys, shedding up to 4.23 per cent.
"The 2017 state election results in India demonstrate broad-based popular support for the Indian government's policy agenda and will facilitate the implementation of further reforms, a credit positive for the sovereign," Moody's said in a statement.
The current episode highlights the structural vulnerabilities in the liquidity management practices of Indian NBFIs
Moody's on Thursday said the new 'inflation targeting' mechanism is a "credit positive" move.
Amid wholesale price-based inflation ticking up to 7.5 per cent year-on-year in May due to supply-side factors, the agency said it will cause further "headaches" at the RBI.
Berkshire has reduced its stake as various regulatory inquiries and a slowdown in the business of rating lucrative structured bonds has taken a toll.
Earlier, ratings agencies like Standard and Poor's and Fitch had threated to downgrade India's sovereign credit rating to junk grade in view of the worsening fiscal position of the government.
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The rupee had slumped to a record low of 59.9850 rupee to the dollar on Thursday, as the country's record high current account deficit is exacerbating its vulnerability in an emerging market rout.
Sunrisers Hyderabad coach Tom Moody has heaped praise on opener Parthiv Patel for playing a "mature innings", which laid the foundation for their 30-run win over Kings XI Punjab and improved their chances of reaching the IPL semi-final.
International rating agency Moody's is likely to upgrade the rating of the country's leading private company Reliance Industries following improvement in its financial position.
The Indian doubles ace and the South African will team up at the Australian Open.
Moody's had revised credit outlook of Germany to negative, raising the possibility of the economic major losing its coveted 'Aaa' rating amid worsening European debt turmoil.
Moody's, which cut its FY14 growth estimate to 4.5 per cent recently, said economic growth will be lowest in a decade.
The ties between India and the Maldives came under severe strain since Muizzu, known for his pro-China leanings, took charge of the top office in November.
Moody's said domestic growth will offset global headwinds.
