"...(growth prospects have improved) with a new finance minister, the withdrawal of an obstinate coalition partner and a flurry of pro-business reforms designed to lift the economy from its funk...These moves are working," Moody's said in a report.
The government has been able to push through economic reforms, especially allowing foreign investment in multi-brand retail, after withdrawal of support by Trinamool Congress.
The government had also expressed its commitment to raise FDI cap in the insurance sector. This would require approval of Parliament.
Noting that "policy missteps and political paralysis" crushed business confidence and investment in 2012, the Moody's report said, "India should ...enjoy a better 2013, though for different reasons."
The report said Asia's economies have weathered the global downturn and will enter 2013 in comparatively good shape. Risk levels appear manageable, domestic policy settings remain highly accommodative, and the global outlook has begun to stabilise.
P Chidambaram took over the finance portfolio in August when the then Finance Minister Pranab Mukherjee became the Presidential candidate.
Mukherjee was later elected as President.
The rating agency further said that near-term risks around India's fiscal and external deficits have receded.
"Business groups are more upbeat; this will translate into better investment and GDP growth, but not until well into 2013. The moves help to lock in our longer-term outlook," the it said.
Trinamool does not accept Moody's view
Trinamool Congress today refused to accept rating agency Moody's assessment that its exit from UPA government had improved the prospects of India's economy.
"TMC hopes Moody┐s is right & India's economy does well in 2013. But the definition of 'does well' is open to question," party MP Derek O'Brien said in a tweet.
He took exception to TMC being blamed for India's slow economic growth.
"As for Moody's, note these dates: In March 2009, it warns UPA against 'slowing growth'. In May 2009, TMC joins UPA govt. So far so good," said O'Brien, who is the party's Chief Whip in the Rajya Sabha.
He maintained TMC is a "development-oriented party concerned with issues of livelihood & survival for common people" and added "we are not surprised, of course, that the minority UPA gov(ernmen)t prefers Wall Street buccaneers to the earthy wisdom of 'Ma Maati Manush'."
He was commenting on Moody's observation that withdrawal of support to government by an 'obstinate coalition partner' and flurry of reforms have improved India's growth prospects in 2013.
Though Moody's did not name Trinamool, the reference was clearly to the party which quit the government in September, protesting the decision on allowing 51 per cent FDI in multi-brand retail and to cap on supply of subsidised LPG.