India's credit rating outlook was raised to positive by Moody's Investors Service, signaling optimism in the efforts of Prime Minister Narendra Modi and central bank chief Raghuram Rajan to improve Asia's No 3 economy.

The country's Baa3 rating was affirmed and the outlook was revised from stable, Moody's said in a statement on Thursday in Singapore. India is rated the lowest investment grade, on par with Indonesia, Iceland and Turkey.

"There is an increasing probability that actions by policymakers will enhance the country's economic strength and, in turn, the sovereign's financial strength over coming years," Moody's said. "India has grown faster than similarly rated peers over the last decade due to favorable demographics, economic diversity, as well as high savings and investment rates."