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Investing.com -- S&P Global Ratings raised India’s long-term sovereign credit rating to ’BBB’ from ’BBB-’ on Thursday, citing the country’s strong economic growth and improved fiscal outlook.
The ratings agency also upgraded India’s short-term ratings to ’A-2’ from ’A-3’ and revised its transfer and convertibility assessment to ’A-’ from ’BBB+’. The outlook on the long-term rating is stable.
S&P highlighted India’s "buoyant economic growth" and enhanced monetary policy environment that has helped anchor inflation expectations. The agency noted that India remains among the world’s best performing economies, with real GDP growth averaging 8.8% from fiscal 2022 to fiscal 2024 - the highest in Asia-Pacific.
Looking ahead, S&P expects India’s growth dynamics to continue, projecting GDP to increase by 6.8% annually over the next three years. For fiscal 2026 specifically, the agency forecasts 6.5% real GDP growth.
The stable outlook reflects S&P’s view that continued policy stability and high infrastructure investment will support India’s long-term growth prospects, alongside cautious fiscal and monetary policies that moderate the government’s elevated debt and interest burden.
India’s fiscal position, which S&P described as "the most vulnerable part of its sovereign ratings profile," has shown improvement. The agency projects the general government deficit to decline from 7.3% of GDP in fiscal 2026 to 6.6% by fiscal 2029.
The quality of government spending has also improved, with increased budget allocation to infrastructure. Capital expenditure of the union government is scheduled to increase to 3.1% of GDP in fiscal 2026, up from 2% a decade ago.
S&P believes potential U.S. tariffs would have a manageable impact on India’s economy, noting that the country is relatively less reliant on trade with about 60% of its economic growth stemming from domestic consumption.
The agency also praised India’s monetary policy reforms, pointing out that inflation has stayed well-anchored compared to a decade ago when it frequently reached double digits. In recent months, inflation has remained at the lower bound of the Reserve Bank of India’s target range of 2%-6%.
S&P could lower the ratings if it observes an erosion of political commitment to consolidate public finances or if India’s economic growth slows materially on a structural basis. Conversely, ratings could be raised if fiscal deficits narrow meaningfully such that the net change in general government debt falls below 6% of GDP on a structural basis.
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