India's Credit Profile Strengthens: S&P Raises Rating to BBB After 18 years

SYNOPSIS

After 18 years, S&P has upgraded India’s credit rating to “BBB”, citing strong growth, fiscal consolidation, monetary policy, high infrastructure investment-factors which are set to boost the country's long-term growth.

India's credit rating has been upgraded to "BBB" by S&P after 18 years, due to strong growth, fiscal consolidation, and infrastructure investment.

India has entered a new chapter in its financial journey. On August 14, 2025, Global Ratings agency S&P upgraded India’s long-term sovereign rating   from “BBB-” to “BBB”, while maintaining the economic outlook as “stable”. It is the first sovereign rating upgrade to India by S&P in 18 years as it had last upgraded the country in 2007.

Reasons for the Upgrade

S&P pointed to several structural changes in India’s economy as the reason for its decision:

1. Strong Growth:

   In Asia-Pacific, growth in real GDP averaged 8.8% in India between 2022-2024.The economy is expected to grow by 6.8% a year for the next three years.

   
   

2. Fiscal Consolidation:

   The government has been disciplined fiscally, cutting deficits and increasing the efficiency of its spending. The fiscal deficit moderated to 5.1% of GDP in 2024 from 6.4% in 2021.

   
   

3. Monetary Policy:

   The Reserve Bank of India’s inflation-targeting approach has helped stabilize inflation expectation. The average headline inflation came in at 4.8% in 2024, inside the Reserve bank of India's permissible range.

   
   

4. External Resilience:

   India’s transfer and convertibility risk rating were elevated to “A-” from “BBB+”, indicating greater buffers. Foreign exchange reserves remained above $650 billion in mid-2025.

Market Reaction

The markets liked the upgrade:

1. The rupee was trading at 87.66 a dollar down by 8 paise and further appreciated to 87.58 per dollar.

   
   

2. The 10-year bond yield dropped around 7 basis points to 6.38%.

   
   

3. Stocks stock moved higher as stocks received a boost from the rating and softening energy worries.

Where does India stand Globally?

India is now rated on par with that of Mexico, Italy, and the Philippines. However, other agencies still rate India as BBB- (Stable) by Fitch and Baa3 (Stable) by Moody’s. Risks and outlook S&P detailed the risk factors that could affect India’s rating: — Weakened loss of fiscal control. Slowdown factoring into dent sustainability and additional rating upgrades could be awarded if the fiscal deficit is much lower. General government debt is less than 6% of GDP.

Conclusion

The upgrade is based on India’s strong economic shock-absorbers, its ongoing fiscal consolidation with a clearer commitment to low inflation, and a bank recognition of the authorities ambition to establish a healthier banking sector. Now it is viewed as a watershed moment for upgrading India’s financial standing after nearly two decades. This elevation is considered a boost to global investors’ confidence in the Indian economy.

Riddhi Jain