S&P Global upgrades India’s credit rating to 'BBB' amid resilience

Credit ratings agency S&P Global has upgraded India’s long-term unsolicited sovereign credit rating to ‘BBB’ from ‘BBB-’, highlighting the country’s robust economic performance, sustained fiscal consolidation, and policy stability. The outlook remains stable.The agency said its stable outlook reflects expectations of continued policy stability and high infrastructure investment, both of which are poised to bolster India’s long-term growth trajectory. S&P also noted that while potential U.S. tariffs could pose trade challenges, the overall impact on India’s economy is likely to be manageable due to strong underlying fundamentals.“Robust economic expansion is having a constructive effect on India's credit metrics,” S&P stated. “We expect sound economic fundamentals to underpin growth momentum over the next two to three years, supported by increasingly conducive monetary policy settings to manage inflationary expectations.”
Strong Recovery from Pandemic
India’s real GDP growth averaged 8.8% from fiscal year 2022 to 2024 — the highest in the Asia-Pacific region — marking a remarkable rebound from the COVID-19 pandemic. Over the next three years, S&P projects GDP growth at 6.8% annually, helping moderate the government debt-to-GDP ratio despite fiscal deficits.
Oil Imports and Global Trade Tensions
The report comes amid ongoing trade policy tensions. Former U.S. President Donald Trump had previously criticized India’s economic policies and crude oil purchases from Russia. S&P, however, said that even if India had to shift away from Russian oil imports, the fiscal impact would be modest given the small price gap between Russian and global benchmarks.
Risks and Potential for Further Upgrades
S&P warned that a downgrade could occur if political commitment to fiscal consolidation weakens or if structural growth slows significantly, undermining fiscal sustainability. Conversely, the rating could be upgraded further if fiscal deficits narrow enough to reduce the net change in government debt to below 6% of GDP on a sustained basis.The agency attributed the current upgrade to India’s buoyant growth, improved monetary policy environment, and the government’s focus on higher-quality spending and fiscal discipline.
“The protracted rise in public investment in infrastructure will lift economic growth dynamism that, combined with fiscal adjustments, would alleviate India's weak public finances,” S&P noted.

(Business Correspondent)