New Delhi, Aug 14: In a significant vote of confidence for India’s economic trajectory, S&P Global Ratings has upgraded the country’s long-term unsolicited sovereign credit rating from ‘BBB-’ to ‘BBB’, and its short-term rating from ‘A-3’ to ‘A-2’. The outlook on the long-term rating remains stable, reflecting continued optimism over India’s economic policies, growth prospects, and fiscal management.
Alongside the rating upgrade, S&P also raised India’s transfer and convertibility assessment from ‘BBB+’ to ‘A-’, citing an improved external and monetary environment. The stable outlook signals confidence in India’s ability to sustain its growth path, supported by high infrastructure investments and a disciplined policy framework.
S&P highlighted that the government's efforts toward fiscal consolidation and targeted spending are gradually reducing the country’s debt and interest burden. However, the agency cautioned that any retreat from fiscal discipline or a significant slowdown in structural growth could negatively affect the ratings. On the flip side, a further upgrade could be possible if India narrows its fiscal deficit significantly—keeping net government debt additions sustainably below 6% of GDP.
India’s economic performance was a major driver behind the upgrade. With real GDP growth averaging 8.8% between FY2022 and FY2024—the highest in the Asia-Pacific region—S&P projects a continued robust performance, estimating average annual growth of 6.8% over the next three years.
Despite ongoing fiscal deficits, this strong growth is helping to bring down the debt-to-GDP ratio. According to S&P, India's economy is also shielded from global volatility due to its high reliance on domestic consumption, which contributes around 60% to GDP growth. This has provided resilience in the face of external challenges, such as U.S. tariffs and changes in energy import dynamics.
India’s fiscal position, historically a weak point in its credit profile, is showing notable improvement. S&P projects that the general government deficit will decline from 7.3% of GDP in FY2026 to 6.6% by FY2029, aided by a shift in spending priorities. Over the past several years, the government has increasingly focused on capital expenditure, rather than consumption-driven spending.
In FY2026, the Union Government’s capital spending is expected to reach INR 11.2 trillion, or roughly 3.1% of GDP—up from 2% a decade ago. When combined with state-level spending, total public infrastructure investment now amounts to approximately 5.5% of GDP, placing India on par with or even ahead of many global peers.
