NEW DELHI: S&P Global Ratings has upgraded India’s long-term sovereign credit rating to ‘BBB’ from ‘BBB-’, with a stable outlook, citing robust economic growth, effective monetary policy, and the government’s sustained focus on fiscal consolidation. The short-term rating has also been raised to ‘A-2’ from ‘A-3’.
The agency said India’s prioritisation of fiscal consolidation, along with its strong infrastructure investment push, reflects a clear political commitment to sustainable public finances. It expects strong economic fundamentals to continue driving growth over the next two to three years, supported by more effective monetary policy in anchoring inflation expectations.
The stable outlook assumes continued policy stability and high infrastructure investment, coupled with cautious fiscal and monetary measures aimed at easing India’s elevated debt and interest burden.
Risks and Triggers
Downside: Ratings could be lowered if political commitment to fiscal consolidation weakens or if economic growth slows significantly on a structural basis, undermining fiscal sustainability.
Upside: An upgrade is possible if fiscal deficits narrow enough to reduce the net change in general government debt to below 6% of GDP on a sustained basis.
S&P noted that India’s buoyant growth and improved monetary policy framework have strengthened its credit metrics. Real GDP growth averaged 8.8% between FY2022 and FY2024 — the fastest in the Asia-Pacific — and is projected to average 6.8% annually over the next three years. This, the agency said, should help moderate the debt-to-GDP ratio despite continued wide fiscal deficits.
On external risks, S&P expects the impact of U.S. tariffs on India to be manageable, given that about 60% of growth comes from domestic consumption. It also sees limited fiscal cost from any shift away from Russian crude, given the narrow price gap with other international benchmarks.
While fiscal settings remain the most vulnerable aspect of India’s sovereign rating, S&P noted that the government is pursuing a more concrete — though gradual — path to consolidation. It projects the general government deficit to narrow from 7.3% of GDP in FY2026 to 6.6% by FY2029.
The Ministry of Finance in a message posted on platform X said that the Government of India welcomes the decision by S&P Global Ratings to upgrade India’s long-term sovereign credit rating to ‘BBB’ from ‘BBB-’ and its short-term rating to ‘A-2’ from ‘A-3’, with a Stable Outlook. S&P last upgraded India in January 2007 to ‘BBB’, hence, this rating *upgrade* comes after an 18-year gap.
"The ratings upgrade reaffirms that under Prime Minister Shri @narendramodi ’s leadership, providing stability, India’s economy is truly agile, active, and resilient," the ministry claimed.
India, it added, 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.
S&P’s is the second sovereign rating revision this year. DBRS had recently upgraded India to BBB status, the message noted.