Moody’s retains India rating at ‘Baa3’, maintains stable outlook

Moody’s Ratings on Monday (September 29, 2025) affirmed India’s long-term local and foreign-currency issuer ratings and the local-currency senior unsecured rating at Baa3 with a ‘Stable’ outlook on the back of robust economic growth and sound external position.

The global rating agency also affirmed India’s other short-term local-currency rating at P-3.

“The rating affirmation and stable outlook reflect our view that India’s prevailing credit strengths, including its large, fast-growing economy, sound external position, and stable domestic financing base for ongoing fiscal deficits will be sustained,” it said in a statement.

These strengths lend resilience to adverse external trends, in particular as high US (Aa1 stable) tariffs and other international policy measures hinder India’s capacity to attract manufacturing investment, it said.

India’s credit strength is balanced by long-standing weaknesses on the fiscal side, which will remain, it said.

Strong GDP growth and gradual fiscal consolidation will lead to only a very gradual decline in the government’s high debt burden, and will not be sufficient to materially improve weak debt affordability, especially as recent fiscal measures to reinforce private consumption erode the government’s revenue base, it said.

India’s long-term local-currency (LC) bond ceiling remains unchanged at A2 and its long-term foreign-currency (FC) bond ceiling remains unchanged at A3, it said.

“The four-notch gap between the LC ceiling and issuer rating reflects modest external imbalances as represented by persistent, albeit narrow, current account deficits; a relatively large government footprint in the economy; and moderate predictability and reliability of government policies,” it said.

The one-notch gap between the LC and FC ceiling reflects limited external indebtedness and the low likelihood of a debt moratorium, especially in the context of recent steps towards liberalisation of non-resident portfolio investment, it said.

On August 14, S&P Global Ratings upgraded India’s sovereign rating by a notch to ‘BBB’, from ‘BBB-‘, with a stable outlook — its first upgrade for India in over 18 years.