S&P Global Ratings lifted India’s long-term sovereign credit rating to BBB from BBB-, marking the first upgrade in 18 years. The outlook remains stable.
Top Takeaways
- Upgrade to BBB from BBB-; first upgrade in 18 years; outlook stable.
- Drivers: strong economic growth, improved monetary policy credibility, and sustained fiscal consolidation.
- Short-term rating raised to A-2 (from A-3); transfer & convertibility assessment to A- (from BBB+).
- Real GDP growth averaged 8.8% during FY2022–FY2024 (highest in Asia-Pacific); projected at 6.8% annually over the next three years.
- Debt-to-GDP ratio seen easing from ~83% in FY2025 to ~78% by FY2029.
- Market reaction: INR strengthened to Rs 87.59 per USD (from Rs 87.66); 10-year yield fell to 6.3842% (from 6.457%).
Why S&P Upgraded India
S&P cited three pillars for the move: India’s buoyant growth, a stronger and more credible monetary policy framework that anchors inflation expectations, and sustained fiscal consolidation with improved quality of government spending.
The agency expects continued policy stability and high infrastructure investment to support long-term growth.
How India Compares Across Rating Agencies
Sovereign long-term foreign-currency ratings currently noted by agencies:
| Agency | Long-Term Rating | Notes |
|---|---|---|
| S&P Global Ratings | BBB (outlook: stable) | Upgraded from BBB- on Thursday, August 14. |
| Fitch Ratings | BBB- | In place since 2006. |
| Moody’s | Baa3 | In place since June 2020. |
Growth, Deficits, and Debt Path
Growth Snapshot
- Average real GDP growth: 8.8% in FY2022–FY2024.
- Projection: about 6.8% annually over the next three years.
Debt Trajectory
- Debt-to-GDP around 83% in FY2025.
- Expected to decline to about 78% by FY2029.
- India’s fiscal year runs April to March.
External Pressures and S&P’s View
S&P expects the impact of U.S. tariffs on India to be manageable because India relies less on external trade and more on domestic demand.
India faces the prospect of a 50% tariff on exports to the U.S. after President Donald Trump doubled the levy, citing India’s oil purchases from Russia.
S&P also lifted the transfer and convertibility assessment to A-, reflecting improved external resilience.
Policy Signals That Could Move the Rating Next
S&P indicated it could raise the rating further if fiscal deficits narrow meaningfully, such that the net change in general government debt falls below a clearly lower share of GDP on a structural basis. The agency earlier flagged a threshold of below 7% of GDP, and also highlighted below 6% of GDP as supportive for future upgrades.
Market Reaction
- INR: strengthened to Rs 87.59 per USD from Rs 87.66 before the announcement.
- 10-Year G-Sec: yield fell by 7 bps to 6.3842% from 6.457%.
Government Response
The finance ministry welcomed the decision and said India will continue its growth momentum and take further reform steps to pursue the goal of becoming a developed economy by 2047.
FAQs
What exactly did S&P change?
S&P raised India’s long-term sovereign credit rating to BBB from BBB-, kept the outlook stable, upgraded the short-term rating to A-2, and moved transfer & convertibility to A-.
Why now?
The agency pointed to strong economic growth, improved monetary policy credibility, and ongoing fiscal consolidation with better spending quality.
How fast is the economy growing?
Real GDP growth averaged 8.8% during FY2022–FY2024, with a projected pace of about 6.8% annually over the next three years.
What about India’s debt?
The debt-to-GDP ratio is expected to decline from roughly 83% in FY2025 to about 78% by FY2029.
How do other agencies rate India?
Fitch rates India at BBB- (since 2006), and Moody’s at Baa3 (since June 2020).
Did markets react?
Yes. The rupee strengthened to Rs 87.59 per USD, and the 10-year benchmark yield fell to 6.3842%.
S&P Upgrade Boosts Indian Corporate Dollar Bonds
Update: Aug 21, 2025.
Indian corporate dollar bonds saw strong investor interest after S&P Global upgraded the country’s rating. This caused the spreads over U.S. Treasuries to shrink by 10-14 basis points. For example, the State Bank of India’s 2029 dollar bond spread fell from 77 to 64 basis points, while the Export-Import Bank of India’s 2035 bond tightened from 83 to 71 basis points. Even companies outside the banking sector, like Reliance Industries, saw their bond spreads narrow, with its January 2032 bond falling 14 points to 63 basis points.
The tighter spreads mean banks and lenders can now borrow more cheaply, which could help borrowers as well. State-linked issuers and major banks are expected to gain the most from easier access to offshore funding. The upgrade reflects India’s improving fiscal health and stronger macroeconomic outlook, giving investors more confidence in the country’s corporate debt market.
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