Credit ratings agency S&P Global on Thursday upgraded India’s long-term unsolicited sovereign rating from ‘BBB-’ to ‘BBB’, citing strong economic growth, continued fiscal consolidation, and policy stability.
The agency also raised India’s short-term sovereign rating to ‘A-2’ from ‘A-3’ and revised its transfer and convertibility assessment to ‘A-’ from ‘BBB+’, maintaining a stable outlook on the long-term rating.
S&P Global attributed the stable outlook to sustained policy consistency and high levels of infrastructure investment. It noted that India is prioritizing fiscal consolidation, reflecting the government’s political commitment to sustainable public finances while continuing its strong infrastructure push.
“Robust economic growth is strengthening India’s credit metrics, and we expect sound fundamentals to support growth momentum over the next two to three years. Additionally, monetary policy has become more effective in managing inflation expectations,” the agency said, adding that these factors would support the rating over the next 24 months.
The agency highlighted that India remains one of the world’s best-performing economies. It praised India’s “remarkable comeback” post-pandemic, with real GDP growth averaging 8.8% between fiscal 2022 and 2024, and projected annual GDP growth of 6.8% over the next three years.
S&P Global cautioned that the rating could be downgraded if political commitment to fiscal consolidation weakens or if structural economic growth slows significantly, affecting fiscal sustainability. Conversely, the rating could be upgraded if fiscal deficits narrow substantially, with net government debt falling below 6% of GDP structurally. The agency added that continued public investment in infrastructure, combined with fiscal adjustments, would enhance growth and improve public finances.
Regarding trade tensions, S&P Global noted that even with the US imposing an additional 25% tariff on Indian imports on August 6—bringing total tariffs on some goods to 50% in response to India’s oil imports from Russia — the impact on India’s long-term growth is expected to be marginal. The tariff may cause a one-off slowdown, but is unlikely to derail India’s growth trajectory.