Rating agencies appear to be thawing in their assessment of India's credit-worthiness. Fitch and Standard & Poor's, in separate statements, find progress on reforms encouraging enough to push the possibility of a downgrade further away, but India is by no means out of the woods yet. Both agencies continue to have a negative outlook on the country's investment-grade ranking till the impact of the reforms undertaken since September last year shows up in growth trends. Moody's, the third in the troika of rating agencies, has been less alarmed by the government's macroeconomic management and has retained its stable outlook even as the other two set the dovecotes on Raisina Hill aflutter with their warnings of impending cuts. The government has been working strenuously to avoid 'junk' grade and the associated higher cost of foreign capital. It is an uphill task, given the record of rating agencies correcting a negative outlook - in their worldview things go wrong very quickly but improvements are rare.

The foreign investor's appetite for reforms has been whetted by the recent flurry. Bosses of the International Finance Corporation, the commercial lending arm of the World Bank, and the Asian Development Bank have pointed to the glacial pace of restructuring in services, particularly the financial sector. As the Reserve Bank of India readies rules for a new set of private banks, the institutions pointed out in media reports that delayed bank licences were holding up job-creating growth while gaps in physical infrastructure were limiting the country's manufacturing competitiveness. These statements come close on the heels of finance minister P Chidambaram's January road shows in Asia and Europe to revive investor confidence. Mr Chidambaram's reforms record since he took over as finance minister last year is impressive but his ambitions may have to be tempered in an election-year budget.

For the moment, investors may have to settle for phased fiscal and current account corrections. The finance minister has indicated he will present a responsible budget and the government will implement many of the decisions and changes in the run-up to the polls. The growth-inflation dynamic, which has been by and large adverse for three years running, is also heading towards normalcy thanks to the single-minded efforts of the central bank. Credit rating agencies will be watching these two developments very closely if they decide to de-rate the India story. So far the government has managed to push that eventuality beyond March 2013. That is an achievement in itself. If Mr Chidambaram can prevail on the UPA to stay on the reforms course till May 2014, his achievement will be singular.