The rating agency said that risks around the economy, particularly the fiscal and current account deficits, have begun to recede and the gains in financial markets has started reflecting the rising expectations around the economy as well as lower risk.
Moody's expects India's headline inflation to drop to 6 per cent by year's end, paving the way for an expected rate cut around mid-2013.
Moody's said that the Budget 2013-14 delivered the easiest and smallest cuts in the deficit, enough to free up funds to help the government's 2014 electoral chances without fanning fiscal risk.
Moody's said the budget does nothing to fortify India's long-term growth. But it does suggest that government consumption, which slowed sharply in the fourth quarter, will accelerate in 2013, lifting GDP growth.
Moody's forecast economic growth of around 7% from 2014, which is India's new rate of trend growth. However, it rejects double-digit growth view and said that this is wildly optimistic and, without significant structural reform, a dangerous view to take.
Meanwhile, all four BRIC economies -- Brazil, Russia, India and China -- registered slower increases in new business since January but overall business expectation for the next 12 months continue to be robust.