S&P Global upgrades India’s rating after 18 years to ‘BBB’, cites economic resilience & fiscal consolidation

The ratings agency S&P Global has after an 18-year gap upgraded India’s rating, to BBB from BBB-, citing the country’s “economic resilience and fiscal consolidation”. S&P also kept India’s long-term outlook as ‘stable’. 

In a post on X, the Ministry of Finance welcomed the decision, saying it underscored the stability provided by Prime Minister Narendra Modi’s leadership.

“The upgrade of India reflects its buoyant economic growth, against the backdrop of an enhanced monetary policy environment that anchors inflationary expectations,” S&P Global said. “Together with the government’s commitment to fiscal consolidation and efforts to improve spending quality, we believe these factors have coalesced to benefit credit metrics.”

It added that the stable outlook reflected the ratings agency’s view that continued political stability and high infrastructure investment will support India’s long-term growth prospects.

“The Government of India welcomes the decision by S&P Global Ratings to upgrade India’s long-term sovereign credit rating to ‘BBB’ from ‘BBB-’ and its short-term rating to ‘A-2’ from ‘A-3’, with a Stable outlook,” the Ministry of Finance said in its post on X. 

It noted that S&P had last upgraded India in January 2007 to ‘BBB-’, meaning this latest upgrade comes after an 18-year gap.

“The ratings upgrade reaffirms that under Prime Minister Shri @narendramodi ’s leadership, providing stability, India’s economy is truly agile, active, and resilient,” it added.

S&P is the second sovereign rating upgrade for India this year, with DBRS also upgrading India to BBB status in May.

“We believe the effect of U.S. tariffs on the Indian economy will be manageable,” S&P added. “India is relatively less reliant on trade and about 60% of its economic growth stems from domestic consumption.” 

It added that it expects the fiscal cost of switching away from importing Russian crude oil, if it does happen, would be “modest” given the narrow price differential between Russian crude and current international oil prices.

“Government bond markets are rallying on this news as this would encourage more foreign and FPI inflows into the bond markets,” Vishal Goenka, co-founder of IndiaBonds.com said in reaction to the news.

“A higher credit rating systematically gets more investments into the country as risk-adjusted returns are better,” Mr. Goenka added. “We see India will remain in the global spotlight for emerging market favourable asset allocations and for bond yields to fall in the short term.”