The timing of the Moody's move was actually surprising given questions around India's fiscal health, three different analysts said. The rating upgrade also came at a time when the most recent gauge of economic growth had shown the country slowing to a three-year low of 5.7 percent — with consumption hit by the new Goods and Services Tax and a ban on high-value notes.
"The timing of the upgrade is odd," Vishnu Varathan, Mizuho's head of economics and strategy, wrote in a note on Friday.
He added that India's widening deficit is made worse by a pick-up in oil prices, while creeping inflation will limit the Reserve Bank of India's options in managing policy to boost growth. Furthermore, the risk that New Delhi may waive more loans by farmers to gain political favor adds to concerns about the government's finances and credit discipline, Varathan said.
As such, the other two major rating agencies, Fitch and S&P, would not be in a rush to follow suit, analysts said.
"The timing of (Moody's) announcement is a positive surprise," Nomura analysts wrote in a Friday note. "The question now is whether or not S&P and Fitch follow. Our bias is that they will likely wait for the government's fiscal position to actually improve before making any changes."
India's fiscal deficit hit a four-year high of $14.3 billion in the quarter that ended in June — a figure that's 2.4 percent of the country's gross domestic product — according to latest data by the central bank.