Chennai, March 11 (IANS): Maintaining its outlook on India's 'Baa3' rating as stable, global credit rating agency Moody's Investors Service said on Wednesday that an economic recovery along with fiscal improvement will be credit-positive.

In its 'Credit Opinion on India' report, Moody's said: "The outlook on India's Baa3 rating is stable, reflecting the balance between credit support offered by India's favourable growth prospects and the credit risks from India's inflation, infrastructure and fiscal metrics, which are weaker than similarly rated peers."

According to Moody's, an economic growth recovery accompanied by improvement in fiscal, inflation and balance of payments metrics would be credit-positive.

A reduction in infrastructure bottlenecks and regulatory red tape would raise potential growth and competitiveness -- this would also be credit-positive.

Moody's said a rating downgrade would be triggered by a further worsening of India's fiscal position or rising contingent liabilities from the state-owned banking sector or an increase in balance of payments risks.

On India's credit strength, Moody's listed out its large diversified economy, healthy private savings rate and agile private corporate sector.

According to Moody's, the credit challenges include high government debt and deficits; weak physical and social infrastructure; recurrent inflation and regulatory uncertainty and complexity.