The agency said the reforms initiated by the Indian government could improve the business climate, productivity, stimulating foreign and domestic investment, and hence fostering strong and sustainable growth.
The rating agency also said that India's growth potential is significantly higher than the most other baa rated sovereigns. Listing the series of reforms which led to the upgrade, he said while demonetisation took the economy towards greater formalisation and digitisation, use of Aadhaar ensured targeted delivery of government benefits.
Addressing a press conference after Moody's, one of the major ratings agencies upgraded India's sovereign ratings to Baa2 from Baa3, Jaitley said the recognition will further the determination of the government to do better.
The government had successfully implemented the Insolvency and Bankruptcy Code (IBC) 2016, recapitalisation, and setting up of the RBI's Monetary Policy Committee.
Last year, India lobbied hard with Moody's for an upgrade, but failed.
Moody's Investors Service today upgraded India's local and foreign currency issuer ratings to Baa2 from Baa3 and changed the outlook on the rating to stable from positive. In 2015, the rating outlook was changed from "stable" to "positive".
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"Baa3" was the lowest rating in the investment grade - just a notch above the "junk" status. He said the upgrade has not happened in isolation and for the last three years the India has been the fastest growing major economy.
Jaitely said: "Smooth transition of GST is universally recognised as a landmark reform in Indian tax structure".
"And after a long spell of 13 years, India gets the rating upgrade". The agency raised doubts about the country's debt levels and fragile banks, and declined to budge despite the government's criticism of its rating methodology.
Radhika Rao, an economist at DBS, said implementation of reforms, a subdued rural sector and weak investment have slowed economic growth while rising oil prices have raised the risks.
Rejoicing at the news, the Rupee opened with its biggest gain in four years at 64.72/USD.