India on Friday made a strong pitch for a sovereign rating upgrade with Moody's and also questioned the parameters based on which the US-based agency accords ratings, sources said on Friday.

Ahead of its annual review of the sovereign rating, Moody's Investors Service representatives met Indian government officials during which the officials highlighted the reforms and strong fundamentals of the Indian economy.

A higher rating for India would mean the nation is less riskier, translating into lower interest rates on borrowings.

"Moody's acknowledged the positives of the Indian economy. We are hopeful for a rating upgrade from Moody's," an official said after the meeting.

Moody's Investors Service has a 'Baa3' sovereign credit rating on India, with a stable outlook. 'Baa3' is the lowest investment grade rating.

Apart from highlighting India's ongoing economic reforms, government thrust on infrastructure development and forex reserves nearing $600 billion, government officials also questioned Moody's on its rating parameters.

Officials from all economy-related ministries and Niti Aayog attended the meeting.

Methodology in the spotlight

India has long been questioning the methodology adopted by international agencies while according credit rating and has nudged them to become more transparent and less subjective.

It has been pitching for amendment in sovereign credit ratings methodology saying it should reflect economies' ability and willingness to pay their debt obligations.

Moody's representatives discussed the government's disinvestment roadmap and officials highlighted that disinvestment should be seen from the prism of reform and not just revenue generation exercise.

In June 2020, Moody's downgraded India's rating to 'Baa3' from 'Baa2' with a negative outlook, citing weak reform push and slow growth. In October 2021, the outlook on the rating was revised to stable.

India’s fiscal deficit

The government had largely met its fiscal objectives over the past two years. The fiscal deficit, which is the difference between government expenditure and revenue, narrowed to 6.4 per cent of GDP in 2022-23 fiscal, from 6.7 per cent of GDP in 2021-22 fiscal.

In the current fiscal, the deficit is budgeted at 5.9 per cent of GDP.

As per the fiscal consolidation roadmap, the government intends to bring down the fiscal deficit below 4.5 per cent of GDP by 2025-26.

Last month, two other global rating agencies S&P and Fitch had kept India's rating unchanged at 'BBB-', with a stable outlook.

All three global rating agencies — Fitch, S&P and Moody's — have the lowest investment grade rating on India, with a stable outlook. The ratings are looked at by investors as a barometer of the country's creditworthiness and impact borrowing cost.