S&P Global upgrades India Sovereign Ratings to ‘BBB’ From ‘BBB-’

S&P Global said on Thursday that it has raised India’s sovereign rating to BBB from the previous ‘BBB-’.

The outlook on the long-term rating is stable.

This is the first time India has received a sovereign rating upgrade since 2017.

BBB- is the lowest investment-grade rating by a credit rating agency.

An upgrade from that point results in lowering bond yields and better borrowing costs for the government. ‘At the same time, we revised our transfer & convertibility assessment to ‘A-’ from ‘BBB+’’, according to a statement.

India’s benchmark 10-year bond yield dropped 7 basis points since opening on Thursday, dropping to 6.4%.

‘The stable outlook reflects our view that continued policy stability and high infrastructure investment will support India’s long-term growth prospects. That, along with cautious fiscal and monetary policy that moderates the government’s elevated debt and interest burden, will underpin the rating over the next 24 months,’ S&P said in its statement.

The rating agency may lower the ratings if it observes an erosion of political commitment to consolidate public finances. In addition, downward pressure could also come from India’s economic growth slowing materially on a structural basis such that it undermines fiscal sustainability, the rating agency said.

The upgrade of India reflects its buoyant economic growth, against the backdrop of an enhanced monetary policy environment that anchors inflationary expectations, the agency believes. ‘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,’ S&P said.

The global rating firm sees India’s gross domestic product increasing 6.8% annually over the next three years. This has a moderating effect on the ratio of government debt to GDP despite still-wide fiscal deficits, it said.

S&P sees that the impact of US tariffs on Indian exports will be manageable. ‘We expect that in the event India has to switch from importing Russian crude oil, the fiscal cost, if fully borne by the government, will be modest given the narrow price differential between Russian crude and current international benchmarks,’ the rating agency said.

S&P projections indicate a general government deficit of 7.3% of GDP in fiscal 2026 to decline to 6.6% by fiscal 2029.

- Agencies