Mumbai: International rating agency Moody’s has upgraded India’s foreign currency debt rating.

Moody's says it has upgraded the country’s ceiling for foreign currency debt to Ba1 from Ba2, top of the speculative grade. It has also raised the sovereign issuer rating to Ba1 from Ba2.

The agency has also upgraded the country’s ceiling for foreign currency bank deposits to Ba1 from Ba3, unifying it with the government’s Ba 2 domestic currency debt rating, which was not on review and was affirmed with a negative outlook.

Moody’s says the decision concluded a review for upgrade that began in November 2003. The outlook on the Ba1 foreign currency debt ceiling is stable. But Moody’s concern about the poor state of the country’s public finance continues to warrant a negative outlook on the government’s Ba2 domestic currency rating.

The upgraded Ba2 bank deposit ceiling was assigned a negative outlook because of the close linkage between the “risk of government domestic debt restructuring and the potential for restrictions on large foreign currency withdrawals from the banking system.”

Explaining the reasons for the upgrade, the agency says the country’s foreign reserves have expanded especially rapidly over the past year as increased merchandise exports, dynamic sales of information technology services and large workers remittance helped move the current account into surplus, while capital inflows too mounted.