This is the first time in 13 years that the global rating agency has raised India's assessment - to Baa2 from Baa3 - indicating that the economy has moved from "stable" to "positive", and is on a high growth trajectory.
President of industry chamber Ficci Pankaj Patel said the development underlines the fact that India is moving in the right direction.
Moody's also upgraded ratings for a slew of public sector companies - State Bank of India, Export Import Bank of India and Indian Railways Finance Corporation - and the private sector lender HDFC Bank on Friday.
India's growth story is more promising than ever and we see a further improvement in confidence level of global investment community, he said.
Finance Minister Arun Jaitley told reporters Moody's decision was a "belated recognition" of the steps the government has taken to fix India's $2 trillion economy.
Director General of another leading industry body CII Chandrajit Banerjee said: "The upgraded rating of Baa2 will enable lower cost of borrowing in worldwide markets for Indian businesses and attract more foreign funds flows into India".
Sinha advised the government to avoid focussing too much on ratings on World Bank (ease of doing business) and Moody's and rather focus on dealing with the issue of non-performing assets in the banking sector, jobless growth and lack of demand in the Indian economy.
"Markets should worry that the government now having received the ratings upgrade, may actually slacken and relax its commitment to reducing fiscal deficit, as per the stated plan - especially, at a time when investors seem to be worrying about the same as reflected in the increase in bond yields of more than 50 bps since August 2017,"said Mr Chari".
Moody boost for Modi: India's sovereign bond rating raised
Stocks of firms like HPCL, IOC, ONGC, GAIL and NTPC rallied as these firms were amongst those which got an issuers and ratings upgrade.
New Delhi- The ruling BJP and the government on Friday cheered United States credit ratings agency Moody's upgradation of India's sovereign ratings, with party President Amit Shah and several ministers tweeting that it was a recognition of all the good work done by the NDA.
The benchmark BSE Sensex hit as high as 33,520.82 before paring gains to end the session up 235.98 points or 0.71 percent at 33,342.80.
Anis Chakravarty, lead economist, Deloitte India, said Moody's rating upgrade "can be expected to bring buoyancy in equity and debt markets". "In the economic survey presented earlier this year, the government criticised ratings agencies for not giving India an upgrade".
"The intent of Modi government is to continue with its reform agenda", he said.
Over the last two years, India has been lobbying hard with Moody's for an upgrade.
This is unedited, unformatted feed from the Press Trust of India wire.More news: Incredibles 2: first teaser trailer