Rating agency Crisil said rating downgrades in the first six months of 2003-2004 (April-September) were the lowest in the last eight years.

The domestic business outlook had improved dramatically and had provided strong support to the credit quality of rated companies, Crisil said.

Further, for the first time in the last five years, the number of upgrades has exceeded downgrades in the manufacturing, finance and infrastructure sectors.

In a rating round-up for the first half of the current financial year, Crisil said upgrades outnumbered downgrades four to one. The number of upgrades in Crisil's long-term ratings portfolio was eight during the period, whereas downgrades stood at two.

In 2002-2003, there were 14 upgrades versus 19 downgrades. "With steadily improving capacity utilisation across all parts of the industrial economy and a good monsoon, it is hard not be positive about economic prospects," said Crisil's executive director and chief rating officer Roopa Kudva.

The rating agency added the Indian economy seemed set for a strong performance if trends in the future debt repayment capacity of its participants were anything to go by.

In the manufacturing sector, however, rating upgrades slowed from 14 in the full year April 2002-March 2003 to three in the first half of the current financial year.

But the number of downgrades, too, fell from 12 to two over the same periods.

There was a sharp turnaround in the finance sector, reflecting falling interest rates and the consequent improvement in margins in the lending business. This resulted in two upgrades and no downgrades in this sector in the first half of 2003-2004 against five downgrades and no upgrades in 2002-2003.

The infrastructure sector saw a similar improvement with three upgrades and no downgrades in April-September 2003-04 against two downgrades and no upgrades in 2002-03.

Crisil said the stability of its ratings had been improving over the last five years.