Moody's action validates reform steps; want rating upgrade: CEA

India currently has a Baa3 rating from Moody's, which is just a notch above junk status

Chief Economic Adviser Arvind Subramanian today said upgrading of India's outlook to positive by Moody's validates the government's reform thrust as well as the fiscal discipline roadmap, and expressed hope for a rating upgrade in near future.

"Moody's India upgrade validates government's reform thrust; better growth, macro outlook; budget strategy of public investment and fiscal discipline... It confirms the fact that growth and macro-economic prospects of the country are improving," Subramanian told reporters here.

The CEA also expressed hope that the rating agency will upgrade India's rating from 'Baa3' currently. It signifies the lowest investment grade -- just a notch above 'junk' status.

"The focus of the government is what needs to be done for the sake of economy and we hope for an investment upgrade. But that will not drive our policy going forward," Subramanian said.

In a big vote of confidence in the Narendra Modi-led government, Moody's today raised India's credit rating outlook to 'positive' and said an upgrade in its sovereign rating is also possible in the next 12-18 months.

Subramanian said that unseasonal rains that have resulted in crop damage will be a temporary blip on food prices.

"On agricultural prices, I think there is a blip due to unseasonal rains. The expectation is that it will not sustainably affect medium term inflation, especially if the forecast for monsoon this year is good, I think that should have an offsetting effect," he said.

On government's new GDP methodology, he said: "We have to work with these numbers. I think the process has been fantastic but there are some numbers which we need to understand better like the GDP numbers."

Subramanian expressed hope that the government will achieve current fiscal year's growth target, which is 8-8.5 per cent.

"We are now more confident of achieving the current year's growth target," he said.