New Delhi: S&P on Thursday upgraded India’s sovereign credit rating to ‘BBB’ with a stable outlook after over 18 years, citing robust economic growth,
political commitment for fiscal consolidation and ‘conducive’ monetary policy to check inflation.
“India remains among the best performing economies in the world…The quality of government spending has improved in the past five to six years,” S&P Global Ratings said.
The impact of US tariffs on the Indian economy will be “manageable”, S&P said, adding that a 50 per cent tariff on US exports (if imposed) will not pose a “material drag” on growth.
“India is relatively less reliant on trade and about 60 per cent of its economic growth stems from domestic consumption,” it said.
Welcoming the rating upgrade, the Finance Ministry said it reaffirms that under Prime Minister Narendra Modi’s leadership, “India’s economy is truly agile, active, and resilient.” The ministry in a post on X further said India has prioritised fiscal consolidation, while maintaining its strong infrastructure creation drive and inclusive growth approach, that has led to the upgrade.
“India will continue its buoyant growth momentum and undertake steps for further reforms to attain the goal of Viksit Bharat by 2047,” it said.
The rating upgrade by a US-based agency comes days after American President Donald Trump dubbed India as a “dead economy”. Trump has imposed the highest 50 per cent tariff on Indian goods with effect from August 27.
S&P in January 2007 placed India on the lowest investment grade rating of ‘BBB-‘.
The rating upgrade to ‘BBB’ will help lower borrowing cost of Indian companies in international markets. ‘BBB’ is an investment grade rating and denotes improved ability of the country to discharge its debt obligation comfortably.
This is the second sovereign rating revision by a global agency. Earlier this year, Morningstar DBRS had upgraded India’s issuer ratings to ‘BBB’ from ‘BBB (low)’.
In May last year, S&P changed India’s credit rating outlook to ‘positive’, from ‘stable’, and hinted that a rating upgrade could be coming in the next 24 months.
“The upgrade of India reflects its buoyant economic growth, against the backdrop of an enhanced monetary policy environment that anchors inflationary expectations. Together with the government’s commitment to fiscal consolidation and efforts to improve spending quality, we believe these factors have coalesced to benefit credit metrics,” S&P said while upgrading India’s rating.
S&P Global Ratings raised its long-term unsolicited sovereign credit ratings on India to ‘BBB’ from ‘BBB-‘, and its short-term ratings to ‘A-2’ from ‘A-3’.
The stable outlook reflects S&P’s view that continued policy stability and high infrastructure investment will support India’s long-term growth prospects. That along with cautious fiscal and monetary policy that moderates the government’s elevated debt and interest burden will underpin the rating over the next 24 months.
India’s weak fiscal settings had always been the most vulnerable part of its sovereign ratings profile.
“With economic recovery now well on track, the government can depict a more concrete (albeit gradual) path to fiscal consolidation,” S&P said.
S&P projects government deficit of 7.3 per cent of GDP in fiscal 2026 to decline to 6.6 per cent by fiscal 2029.
“India’s recovery from its pandemic nadir places it among the best-performing emerging market economies in the world. Economic expansion is normalising toward a more sustainable level with good momentum. We anticipate solid consumer and public investment dynamics to propel real GDP growth to 6.5 per cent in fiscal 2026 and to average 6.8 per cent over the next three years,” S&P said.
