India on par with Russia

China, with A2 sovereign rating, is five notches above India

Following the rating upgrade by Moody's Investor Services, India now finds itself in the company of Russia, Kazakhstan, Croatia, El Salvador and Trinidad and Tobago among developing countries, which have been classified as investment grade with Baa3 rating.

However, it is still five notches below China, which enjoys an A2 sovereign rating, assigned by Moody's. But Brazil and Indonesia, with a grading of B2, are six notches lower than India.

Other emerging economies like South Africa, Mexico, Tunisia and Mauritius, rated Baa2, are a grade higher than India, while Malaysia, with Baa1 rating, is two notches higher. South Korea, with A3 grade, is three notches above India.

"It's an odd collection of countries with different types of economies but all of them have similar characteristics. There is external liquidity, manageable external debt and all are transition economies moving away from a planned economy model," said Christian Lindow, Moody's vice-president, senior credit officer and the lead analyst for India, referring to the countries with which India is clubbed.

When asked to respond to the government's reaction that the ratings agency was late in its upgrade of India's sovereign rating, Lindow said countries always rated themselves better than the perception of agencies about their economy.

"Countries always think better about themselves than rating agencies, which take a comprehensive view of the situation," she said, in a telephonic conversation with Business Standard from New York.

Lindow said Moody's recognised the constraints of a democracy like India but it was a fact that countries like China were reforming much faster. "It takes a coalition government some time to work. The present government has achieved this after six years and was hamstrung (in reforms) by its coalition partners," she added.