S&P upgrades India’s rating after 18 yrs to ‘BBB’ on robust growth

The S&P Global Ratings on Thursday upgraded India’s sovereign rating to one rung above the lowest investment grade, to ‘BBB’ from ‘BBB-’, citing strong economic growth, improved government spending and political stability under the BJP’s third consecutive term.

The ratings agency also raised India’s short-term rating to ‘A-2’ from ‘A-3’, with a stable outlook, reflecting confidence in the country’s long-term growth prospects.

“The upgrade reflects India’s buoyant economic growth against the backdrop of an enhanced monetary policy environment that anchors inflationary expectations. Together with the government’s commitment to fiscal consolidation and efforts to improve spending quality, we believe these factors have coalesced to benefit credit metrics,” the ratings agency said.

The Ministry of Finance welcomed S&P’s decision and asserted that the rating upgrade was 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’”, the ministry said.

India has prioritised fiscal consolidation, while maintaining its strong infrastructure creation drive and inclusive growth approach, that has led to the upgrade, the ministry said, adding that 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 ministry said on X.

S&P projected India’s GDP to grow at 6.5 per cent in FY26, aligning with the Reserve Bank of India’s forecast, and to average 6.8 pe cent over the next three years, driven by robust consumer demand and public investment.

The agency noted that India’s growth trajectory remained resilient, even in the face of potential US tariffs on Indian goods.

The S&P also noted that shifting away from Russian oil to mitigate US tariffs would have minimal fiscal impact, as the price differential between Russian and international oil had narrowed.