New Delhi [India], May 9 : Global sovereign credit rating agency Morningstar DBRS has upgraded India's Long-Term Foreign and Local Currency - Issuer Ratings from BBB (low) to BBB with a 'stable' trend.
India's Short-Term Foreign and Local Currency Issuer Ratings were also upgraded with a Stable trend.
Key drivers for the upgrade include India's structural reforms through infrastructure investments, digitalisation, among others, all of which facilitated fiscal consolidation (declining debt and deficit).
India sustained high economic growth, clocking an average GDP growth of 8.2 per cent during 2022-25, with macroeconomic stability (stabilised inflation, range bound exchange rate and sound external balance).
A resilient banking system featuring well-capitalised banks with a high capital adequacy ratio and a 13-year low non-performing loans was another significant driver for the upgrade.
The credit rating may be further upgraded if India continues to implement reforms that raise the investment rate, enhancing medium-term growth prospects.
The report also stated that despite the current public debt levels, risks to debt sustainability are limited due to local currency denomination and long maturity structures.
Further, continued reforms and a reduction in the public debt-to-GDP ratio could bring further upgrades.
The rating scale for Morningstar DBRS is similar to the Fitch and S&P rating scales (Morningstar DBRS uses 'high' and 'low' as suffixes compared to the +/- nomenclature used by Fitch and S&P).
Rising trade tensions are adversely impacting global growth expectations. The IMF recently revised its global growth forecast down from 3.3 per cent to 2.8 per cent. Although heightened external risks due to the imposition of U.S. tariffs could impact growth in the coming quarters, the Indian economy is not particularly reliant on trade.
While the near-term outlook is clouded by external risks (i.e. Tariff uncertainty, geo-political tensions), India's favourable demographics, high savings, and potential catch-up in technological capabilities suggest that India's medium-term growth prospects remain strong.
The central government's efforts to improve the investment climate and build out both physical and digital infrastructure reinforce the country's medium-term growth prospects.