New Delhi [India], August 14 : Economists and market experts have welcomed S&P Global Ratings' decision to upgrade India's sovereign credit rating from BBB- to BBB, terming it a recognition of the country's strong fundamentals, sound fiscal management, and growing global economic clout.
In a significant boost to investor confidence, S&P Global Ratings has upgraded India's long-term unsolicited sovereign credit rating to 'BBB', while also raising the short-term rating to 'A-2' from 'A-3'.
The outlook on the long-term rating remains stable, reflecting optimism around India's policy continuity, robust economic growth, and improved fiscal management.
Alongside the rating upgrade, S&P also revised its transfer and convertibility assessment for India to 'A-' from 'BBB+', citing an improved monetary and external environment.
According to S&P, the stable outlook suggests confidence in India's ability to sustain its growth trajectory, driven by high levels of infrastructure investment and a disciplined policy environment.
The Ministry of Finance said the rating improvement "reaffirms that under Prime Minister Narendra Modi's leadership, providing stability, India's economy is truly agile, active, and resilient." It noted that India has kept fiscal discipline a priority while pushing infrastructure growth and inclusive development. These factors, it added, have played a key role in achieving the upgrade.
The Finance Ministry stated that India will "continue its buoyant growth momentum and undertake steps for further reforms to attain the goal of Viksit Bharat by 2047," underscoring that the current direction of fiscal and economic policy will remain unchanged.
Union Minister of Commerce & Industry, Piyush Goyal, also emphasised that India is prioritising fiscal consolidation, maintaining a strong infrastructure creation drive, and advancing an inclusive growth approach.
"This is also a testament that at the heart of our journey towards Viksit Bharat lies our economic resilience and our government's unwavering commitment to ensure a better life for every Indian," he stated in a tweet.
Sanjeev Sanyal, Member of the Prime Minister's Economic Advisory Council, called the upgrade "much required" and said his own assessment had suggested India deserved a higher rating.
"I am pleased to hear that S&P has upgraded India's sovereign rating to BBB from BBB-. This was much required because, as I have said before, the difference between what the ratings were being given by the three big rating agencies and my own model suggested was a gap of two notches," Sanjeev Sanyal, Member of Prime Minister Narendra Modi's Economic Advisory Council.
Sonal Badhan, Economist at Bank of Baroda, said the move would boost investor confidence and aid capital flows. "In both the short and long term, foreign capital inflows can be expected to be impacted positively, as the upgrade reaffirms trust in India's 'sound fundamentals' and 'growth momentum'. We are likely to see higher FPI inflows this year and a decline in bond yields," she noted.
Rishi Shah, Partner & Economic Advisory Services Leader at Grant Thornton Bharat, described the decision as "long overdue," adding, "India's fundamentals were such that this rating upgrade should have happened before time. Our fiscal management and monetary management have been excellent since Covid, especially compared to the rest of the world."
Manoranjan Sharma, Chief Economist, Infomerics Ratings, said, "It is a recognition of India's growing financial might and clout on the global scene. India has arrived on the global scene, and this is a fair recognition of the kind of influence India has, both economically and materially. This will also have an important implications for India, both at the level of macro economy, and also for case of companies, when we raise loans abroad, this improved rating will significantly lower the rate of interest on our loans and advances, and to that extent, it will be beneficial both to the Indian economy and also to a large number of firms who raise Money in the international market."
Rishi Shah (Partner & Economic advisory services leader, Grant Thornton Bharat) on S&P upgraded sovereign rating of India from BBB- to BBB, "This is a positive development, long overdue. India's fundamentals were such that this rating upgrade should have happened before time. They have implemented changes slightly in a delayed fashion, especially since Covid, because our fundamentals have been improving since then. This is partly due to a drop in them because of COVID and the measures the government had to take. But more importantly, these need to be seen in a relative sense. How well have we done since COVID, as opposed to the rest of the world? I think our fiscal management and monetary management have been excellent. And that's why I think this rating is just a reflection of that."
The rating upgrade is expected to improve India's appeal to global investors, reduce borrowing costs, and further strengthen its macroeconomic position amid global uncertainties.
All four agencies consider India to be investment grade, though at the lower end of the scale. S&P's upgrade to BBB is the most notable recent change and signals increased confidence in India's fiscal and economic management. Moody's and Fitch continue with stable outlooks, reflecting both strengths (growth, resilience) and challenges (high debt levels, fiscal constraints).
The Indian government has been critical of sovereign credit ratings methodology, as the Economic Survey of 2020-21 highlighted that it should be made more transparent, less subjective and better attuned to reflect economies' fundamentals.
Recently, in a written reply to the Rajya Sabha, Minister of State for Finance Pankaj Chaudhary said the Government has made sustained efforts to strengthen India's overall economic outlook, thereby positively impacting its credit profile.
These include maintaining sound macroeconomic fundamentals, such as steady growth, price stability, fiscal consolidation, a resilient external sector, robust foreign exchange reserves, a strong banking sector and enhancing physical and digital infrastructure to support investment.