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Rating upgrade further fuels rising market

When Moody's boosted India's rating on January 21, it added fuel to a stock market already breathless from its steep climb last year. Citing India's strong external payments position and progress on peace talks with Pakistan, the rating agency raised India's long-term foreign currency rating to investment grade; India still has a non-investment grade ratings from other agencies.

India's economy is expected to grow at around 7% in the fiscal year to March. Forex reserves are at a record $103 billion. The rupee is rising steadily against the US dollar and foreign portfolio investors pumped in $6.7 billion last year, pushing the benchmark Sensex up over 100% since May 2003.

Hoping to reap the political rewards of a healthy growing economy, the Indian government is set to announce national elections early this year. Prime minister Atal Behari Vajpayee told a meeting of businessmen on January 12 that he hoped a new government would be in place by April this year.

The cryptic response of finance minister Jaswant Singh to the Moody's upgrade was "better late than never", adding that it should help Indian companies lower their cost of borrowing. Singh has done his bit for them.

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