Credit rating agency S&P Global on Thursday upgraded India’s long-term unsolicited sovereign credit rating to “BBB” from the earlier “BBB-“, citing economic resilience and sustained fiscal consolidation.
BBB and BBB- are credit ratings given by agencies like S&P and Fitch to show how safe or risky a borrower (like a company or government) is for investors.
In a note, S&P Global stated that the stable outlook reflects continued policy stability and high infrastructure investment, which are set to boost India’s long-term growth.
“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,” the rating agency said.
Sanjeev Sanyal, Member of Prime Minister Narendra Modi’s Economic Advisory Council, lauded the rise in India’s sovereign credit ratings.
“This was much required. I am pleased to hear about the upgrade in India’s sovereign ratings,” Sanyal said.
Sanyal expressed hope that other agencies would soon align with S&P’s outlook on India.
“By doing this, at least the gap has been reduced somewhat, but I would argue that given India’s economic performance, we should expect a similar upgrade by the other two agencies, as well as over the next two to three years, a further upgrade, because as I said, even after this upgrade, India is probably underrated by one notch,” Sanyal said.
Meanwhile, the short-term rating on India has also been revised to A-2 from A-3 earlier, and the transfer and convertibility assessment has been revised to A- from BBB+.
The impact of US tariffs on India will likely be manageable, with sound economic fundamentals expected to support the country’s growth momentum over the next two to three years, S&P Global’s note mentioned.
In May 2024, the credit rating agency had revised its outlook on the Indian economy to positive from its earlier rating of stable, stating that it may raise the sovereign rating if India’s fiscal deficit narrows meaningfully.
According to the note, India is prioritising fiscal consolidation, demonstrating the government’s political commitment to deliver sustainable public finances, while maintaining its strong infrastructure drive.
The stable outlook reflects our 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,” S&P said in the note.
“In addition, monetary policy settings have become increasingly conducive to managing inflationary expectations,” the note added.
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. India remains among the best-performing economies in the world,” said the note.
(With agency inputs)