S&P upgrades India to BBB with a Stable Outlook, highlighting Economic Resilience and Sustained Fiscal Consolidation

S&P upgrades India to BBB with a Stable Outlook, highlighting Economic Resilience and Sustained Fiscal Consolidation

The Ministry of Finance welcomes the decision by Standard & Poor’s (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. The rating upgrade is a significant affirmation of India’s economic trajectory and prudent fiscal management. This marks the country’s first sovereign upgrade by S&P in 18 years, the previous one being in 2007 when India was elevated to investment grade at BBB-. In May 2024, the agency revised its outlook on India from ‘Stable’ to ‘Positive’.

As per S&P’s India sovereign rating review published today, the upgrade reflects a combination of key factors, including India’s buoyant and dynamic economic growth, the government’s sustained commitment to fiscal consolidation, improved quality of public spending, particularly on capex and infrastructure, and strong corporate, financial, and external balance sheets. Credible inflation management and increasing policy predictability have also played a central role.

S&P in its report details the key strengths of the Indian economy, which have enabled India to stand out as one of the fastest-growing major economies globally, with real GDP growth averaging 8.8 per cent from FY22 to FY24, the highest in the Asia-Pacific region. Monetary policy reforms, particularly the adoption of an inflation-targeting regime, have anchored inflation expectations more effectively, the agency stated. S&P has also recognised that despite global headwinds and price shocks, India has demonstrated resilience by maintaining overall price stability. Monetary improvements, combined with the ongoing development of deep domestic capital markets, have created a more stable and supportive environment for the overall economic scenario. The report further observes that India’s external and financial positions remain strong and the democratic institutions continue to ensure policy continuity and long-term economic stability.

Looking ahead, S&P projects GDP growth of 6.5 per cent in FY26 and a continued momentum over the next three years. The agency suggested that a narrowing fiscal deficit and continued public investment could support further positive rating actions. The report also noted that the impact of recently imposed U.S. tariffs is expected to be limited, owing to India’s large and resilient domestic consumption base.

Recently, another rating agency, Morning Star DBRS had also upgraded India to “BBB” status.