The Crossbill News Desk
S&P Global Ratings on Thursday (August 14) upgraded India’s long-term sovereign credit rating to ‘BBB’ from ‘BBB-’, marking the country’s first upgrade in 18 years.
The agency cited strong economic growth, enhanced monetary policy credibility, and sustained fiscal consolidation as key drivers behind the decision, Reuters reported.
The move follows S&P’s revision of India’s outlook to positive from stable in May 2024, driven by robust growth and improved quality of government spending. The agency also raised its transfer and convertibility assessment to ‘A-’ from ‘BBB+’, reflecting greater external resilience.
India’s real GDP growth averaged 8.8% between fiscal years 2022 and 2024 — the highest in Asia-Pacific — and is projected to expand by 6.8% annually over the next three years.
S&P said the growth momentum is helping moderate the government’s debt-to-GDP ratio despite wide fiscal deficits, and it expects the ratio to decline from 83% in fiscal 2025 to 78% by fiscal 2029.
The upgrade comes amid geopolitical headwinds, including a proposed 50% tariff on Indian exports to the United States, announced by President Donald Trump over New Delhi’s continued oil imports from Russia. S&P said the impact of such tariffs would be manageable, given India’s limited reliance on trade and the dominance of domestic demand in its economy.
“The upgrade of India reflects its buoyant economic growth, against the backdrop of an enhanced monetary policy environment that anchors inflationary expectations,” the agency said.
The finance ministry welcomed the decision, stating that India would continue its growth momentum and pursue further reforms aimed at achieving developed economy status by 2047. Economic Affairs Secretary Anuradha Thakur said she expects other rating agencies to take note and follow suit.
The announcement lifted markets, with the rupee strengthening to 87.58 per dollar from 87.66 and the benchmark 10-year bond yield falling 7 basis points to 6.38%.
“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, adding that the move will likely boost debt inflows and support the long-duration bond rally.
S&P cautioned that risks to the rating include a weakening of political commitment to fiscal consolidation or a structural slowdown in growth that could undermine debt sustainability. Conversely, further upgrades are possible if fiscal deficits narrow significantly, bringing net changes in general government debt below 6% of GDP on a sustained basis.
The agency also noted that any shift in India’s oil sourcing away from Russia would have only a modest fiscal impact, given the narrow price gap between Russian crude and global benchmarks.
The agency cited strong economic growth, enhanced monetary policy credibility, and sustained fiscal consolidation as key drivers behind the decision, Reuters reported.
The move follows S&P’s revision of India’s outlook to positive from stable in May 2024, driven by robust growth and improved quality of government spending. The agency also raised its transfer and convertibility assessment to ‘A-’ from ‘BBB+’, reflecting greater external resilience.
India’s real GDP growth averaged 8.8% between fiscal years 2022 and 2024 — the highest in Asia-Pacific — and is projected to expand by 6.8% annually over the next three years.
S&P said the growth momentum is helping moderate the government’s debt-to-GDP ratio despite wide fiscal deficits, and it expects the ratio to decline from 83% in fiscal 2025 to 78% by fiscal 2029.
The upgrade comes amid geopolitical headwinds, including a proposed 50% tariff on Indian exports to the United States, announced by President Donald Trump over New Delhi’s continued oil imports from Russia. S&P said the impact of such tariffs would be manageable, given India’s limited reliance on trade and the dominance of domestic demand in its economy.
“The upgrade of India reflects its buoyant economic growth, against the backdrop of an enhanced monetary policy environment that anchors inflationary expectations,” the agency said.
The finance ministry welcomed the decision, stating that India would continue its growth momentum and pursue further reforms aimed at achieving developed economy status by 2047. Economic Affairs Secretary Anuradha Thakur said she expects other rating agencies to take note and follow suit.
The announcement lifted markets, with the rupee strengthening to 87.58 per dollar from 87.66 and the benchmark 10-year bond yield falling 7 basis points to 6.38%.
“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, adding that the move will likely boost debt inflows and support the long-duration bond rally.
S&P cautioned that risks to the rating include a weakening of political commitment to fiscal consolidation or a structural slowdown in growth that could undermine debt sustainability. Conversely, further upgrades are possible if fiscal deficits narrow significantly, bringing net changes in general government debt below 6% of GDP on a sustained basis.
The agency also noted that any shift in India’s oil sourcing away from Russia would have only a modest fiscal impact, given the narrow price gap between Russian crude and global benchmarks.
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