The global sovereign credit rating agency, Morningstar DBRS has upgraded India’s Long-Term Foreign and Local Currency – Issuer Ratings from BBB (low) to BBB with a Stable trend, a foreign ministry release said Friday.

India’s Short-Term Foreign and Local Currency Issuer Ratings were also upgraded to R-2 (high) from R-2 (middle) with a Stable trend.

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“Key drivers for the upgrade include India’s structural reforms through infrastructure investments, digitalisation, etc., all of which facilitated fiscal consolidation (declining debt and deficit) and sustained high growth (clocking an average GDP growth of 8.2% during FY22-25) with macroeconomic stability (stabilised inflation, range bound exchange rate and sound external balance),” the release said quoting a report of the global sovereign credit rating agency.

As per the report, a resilient banking system featuring well-capitalised banks with a high capital adequacy ratio and a 13-year low non-performing loans was another significant driver for the upgradation.

India’s credit rating may be further upgraded if it continues to implement reforms that raise the investment rate, enhancing medium-term growth prospects, the report said.

The report also stated that despite the current public debt levels, risks to debt sustainability are limited due to local currency denomination and long maturity structures. Further, continued reforms and a reduction in the public debt-to-GDP ratio could bring further upgrades.

The rating scale for Morningstar DBRS is similar to the Fitch and S&P rating scales (Morningstar DBRS uses ‘high’ and ‘low’ as suffixes compared to the +/- nomenclature used by Fitch and S&P).