New Delhi: S&P Global Ratings, in its latest report, raised India’s long-term sovereign credit rating to ‘BBB’ from ‘BBB-’, with a stable outlook, and upgraded the short-term rating to ‘A-2’ from ‘A-3’. At the same time, S&P revised India’s transfer and convertibility assessment to ‘A-’ from ‘BBB+’.
S&P is an American credit rating agency (CRA) and a division of the New York–based S&P Global.
The ‘BBB’ rating by S&P indicates medium-grade credit quality. In S&P’s scale, divided into 22 levels of ratings, ‘AAA’ is the highest rating reflecting an extremely strong capacity to meet financial obligations while ratings below ‘BBB-’ fall into the “speculative” category, meaning higher risk. Thus, the Thursday upgrade to ‘BBB’ signals that S&P views India’s sovereign finances as investment-grade and secure.
According to S&P, the upgrade reflects India’s robust economic growth, strong political stability, and ongoing fiscal consolidation. The report states that Prime Minister Narendra Modi’s BJP retained a healthy majority in the Lok Sabha following the 2024 general elections, supporting policy continuity and economic reform.
It says India’s economy has recovered strongly from the pandemic, with real GDP growth averaging 8.8% between fiscal 2022 and 2024 the highest in the Asia-Pacific region. S&P expects growth to remain solid, averaging 6.8% annually over the next three years, underpinned by strong domestic consumption which accounts for about 60% of the economy and rising public investment.
In one of its more significant analyses, S&P notes that increases in U.S. tariffs, as U.S. President Donald Trump has threatened, are expected to have a limited impact, as exports to the U.S. account for only about 2% of India’s GDP. Sector-wise exemptions have reduced this exposure further to 1.2% of GDP.
This comes just days before a U.S team is to land in India to seek trade concessions under a threat of increased tariff and even as PM Modi flies to China and Japan.
Additionally, S&P believes that if India has to shift from importing Russian crude oil, the fiscal cost would likely be modest given the small price differences.
The assessment further states that India’s fiscal management is improving, with the central government’s capital expenditure projected to reach INR 11.2 trillion (3.1% of GDP) in fiscal 2026, up from 2% of GDP a decade ago. Combined with state spending, total public investment in infrastructure is estimated at 5.5% of GDP, helping to reduce bottlenecks that could slow long-term growth.
According to S&P, monetary policy reforms have strengthened economic stability, even as inflation has been kept within the Reserve Bank of India’s 2%-6% target range, averaging 5.5% over the past three years. The report also highlights stronger corporate and banking sector balance sheets as supporting factors.
It states that India’s external position remains solid, with current account deficits modest and the rupee actively traded globally. S&P projects net external financial assets held by public and financial sectors to average 6% of current account payments through fiscal 2029.
The report acknowledges some challenges, including the government’s still-large debt and low per capita GDP, but emphasizes that India’s strong external balance sheet, resilient banking sector, and stable democratic institutions provide a solid foundation for maintaining this rating.
S&P also points to policy continuity post-elections and continued public and private investment as key factors supporting India’s growth trajectory.
