After S&P, Japan's R&I Upgrades India's Sovereign Rating To 'BBB+' With Stable Outlook

India’s Credit Rating Upgrade: Japanese credit rating agency Rating and Investment Information (R&I) has upgraded India’s long-term sovereign credit rating to ‘BBB+’ from ‘BBB’, while retaining the ‘stable’ outlook for the Indian economy, citing strong domestic demand, fiscal discipline, and improved external stability.

“Despite the uncertainties surrounding the global economic environment, India’s economy can be expected to maintain firm growth thanks to the economic structures driven by domestic demand and the policies of the administration of Prime Minister Narendra Modi,” R&I said in its India sovereign rating review published on September 19.

It added that the government has made progress in reducing the fiscal deficit at a moderate pace,

and the government debt ratio will likely fall. In addition, external stability has been strengthened, as seen in the current account deficit staying at a low level, the narrowing negative net international investment position and other factors.

“R&I has upgraded the Foreign Currency Issuer Rating to BBB+, based on the said factors including the recognition that the risk related to financial system is limited,” the agency said.

It also affirmed the country’s foreign currency short-term debt rating at a-2.

This is the third such upgrade by a sovereign credit rating agency this year, following S&P’s upgrade to ‘BBB’ (from BBB-) in August 2025 and Morningstar DBRS’ upgrade to ‘BBB’ [from BBB (low)] in May 2025, reaffirming India’s position as one of the most dynamic and resilient major economies in the world.

“The Government of India welcomes the decision by the Japanese credit rating agency, Rating and Investment Information, Inc. (R&I), to upgrade India’s long-term sovereign credit rating to ‘BBB+’ from ‘BBB’, while retaining the ‘Stable’ Outlook for the Indian economy,” the finance ministry said in a statement on Friday, September 19.

👉 India’s Sovereign Rating Upgraded to BBB+ (Stable) by Rating and Investment Information, Inc. (R&I), Japan

👉 This is third such upgrade of India by a sovereign credit rating agency this year, following S&P’s upgrade to ‘BBB’ (from BBB-) in August 2025 and Morningstar DBRS’… pic.twitter.com/4KYO7CTNNV

— Ministry of Finance (@FinMinIndia) September 19, 2025

According to R&I’s report, the ratings upgrade is supported by India’s position as one of the world’s largest and fastest-growing economies, underpinned by its demographic dividend, robust domestic demand, and sound government policies.

R&I in its report recognises the progress in fiscal consolidation by the Government, driven by buoyant tax revenues and rationalisation of subsidies, and manageable level of debt along with high growth.  It also highlights India’s strengthened external stability, reflected in modest current account deficit, stable surpluses in services and remittances, low external debt-to-GDP ratio, and sufficient forex cover.

The report can be read here: news_release_cfp_20250919_23993_eng.pdf.

The agency further stated that the risks associated with the financial system remain limited. “While the government has been increasing capital expenditures, it has managed to reduce the fiscal deficit thanks to the tax revenue increase backed by the strong domestic demand as well as the cut of subsidies,” the Japanese agency said in its statement.

The recent increase in tariffs by the US was acknowledged as a risk factor by the agency, however, it observed that India’s limited reliance on US exports and its domestic demand-driven growth model will contain the impact.  Further it observed that while the GST rationalisation will result in revenue losses, the negative impact will likely be offset to some extent by the stimulation of private consumption.

The agency also praised the policies of the administration of Prime Minister Narendra Modi aimed mainly at attracting foreign manufacturers to India, developing infrastructure, institutionalizing the legal framework to improve the business environment, reducing the reliance on energy imports and ensuring the economic security.