NEWS – S&P Global Upgrades India’s Sovereign Rating After 18 Years

HIGHIGHTS

Long-Term and Short-Term Ratings Raised

• Upgrade: S&P Global raised India’s long-term sovereign credit rating from ‘BBB-’ to ‘BBB’ with a stable outlook.
• Short-Term Rating: Upgraded from ‘A-3’ to ‘A-2’.
• Last Upgrade: Occurred in 2007 to the same ‘BBB’ level.

Reasons for Upgrade

• Economic Resilience: Sustained high growth rates and quick pandemic recovery.
• Low Inflation: Enhanced monetary policy anchoring inflation expectations.
• Fiscal Discipline: Continued fiscal consolidation while maintaining infrastructure spending.
• Strong Growth Outlook: Real GDP growth averaged 8.8% (FY22–FY24), highest in Asia-Pacific.

Official Response

• Finance Ministry: Said the move reaffirms India’s agility, resilience, and focus on inclusive growth.
• Policy Direction: Commitment to infrastructure creation, reforms, and achieving Viksit Bharat by 2047.

S&P’s Assessment on Tariffs

• Impact Expected to be Manageable:
  • India less reliant on trade; ~60% of growth from domestic consumption.
  • US is largest trading partner but tariffs unlikely to cause major drag.
  • Possible switch from Russian crude oil imports would have limited fiscal cost.

Growth Projections

• FY25 GDP Growth: 6.5%, in line with official forecasts.
• Medium-Term Growth: Expected to average 6.8% annually over next three years.
• Debt Management: High growth to moderate debt-to-GDP ratio despite fiscal deficits.