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S&P lifts India's rating to BBB in first upgrade since 2007
S&P expects India's debt-to-GDP ratio to decline to 78 percent by fiscal year 2029, from 83 percent in fiscal 2025.
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Reuters - Thu, 14, Aug 2025
- 18:21 EDT
- 6
FILE PHOTO: High-rise building are pictured in India's financial capital Mumbai, July 24, 2024. / REUTERS/Hemanshi Kamani/File Photo
S&P Global Ratings on Aug. 14 upgraded India's long-term sovereign credit rating to 'BBB' from 'BBB-', the first upgrade in 18 years, citing strong economic growth, improved monetary policy credibility, and sustained fiscal consolidation.
Fitch has rated India at 'BBB-' since 2006 while Moody's has had a 'Baa3' rating in place since June 2020.
The upgrade follows S&P's decision in May 2024 to revise India's outlook to positive from stable, driven by robust growth and better quality of government spending.
Also Read: Trump tariffs hit India's garment makers as US buyers say move production
S&P said it expects the impact of U.S. tariffs on the Indian economy to be manageable due to its limited reliance on trade and the dominance of domestic demand in its economy.
India faces the prospect of a 50 percent tariff on exports to the U.S. after President Donald Trump doubled the levy citing New Delhi's oil purchases from Russia, which numerous other countries have imposed sanctions on after its invasion of Ukraine.
"The upgrade of India reflects its buoyant economic growth, against the backdrop of an enhanced monetary policy environment that anchors inflationary expectations," S&P said.
India's real GDP growth averaged 8.8 percent between fiscal 2022 and 2024, the highest in Asia-Pacific, and is projected to grow at 6.8 percent annually over the next three years. S&P said this momentum was helping moderate the government's debt-to-GDP ratio despite wide fiscal deficits.
The finance ministry welcomed S&P's move and said India will continue its buoyant growth momentum and undertake steps for further reforms to become a developed economy by 2047.
S&P also raised its transfer and convertibility assessment to 'A-' from 'BBB+', reflecting improved external resilience.
S&P expects India's debt-to-GDP ratio to decline to 78 percent by fiscal year 2029, from 83 percent in fiscal 2025. The country's fiscal year runs April-March.
The Indian rupee strengthened to 87.58 per dollar from 87.66, while the benchmark 10-year bond yield fell 7 basis points to 6.38 percent following the announcement.
"The S&P upgrade comes as music for debt markets and also a good news given that it comes after the U.S. president terming the Indian economy 'dead'," said Aishvarya Dadheech, chief investment officer at Fident Asset Management.
"This will boost debt inflows and ease worries over the long-duration bond rally faltering due to dwindling demand from banks," he added.
Risks to the rating include a weakening of political commitment to fiscal consolidation or a structural slowdown in economic growth that undermines debt sustainability, S&P said.
Any shift in India's oil supplies away from Russia, if fully borne by the government, will have a modest impact on government finances given the narrow price differential between Russian crude and current international benchmarks, S&P said.
Conversely, further upgrades are possible if fiscal deficits narrow significantly, bringing the net change in general government debt below 6% of GDP on a sustained basis, it added.
India's Economic Affairs Secretary Anuradha Thakur said she expects other rating agencies to also take note of the factors that have led to the upgrade and follow suit.
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