India Gets Ratings Boost: S&P Upgrades Sovereign Outlook After 18 Years

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S&P Global Ratings has upgraded India’s sovereign rating to BBB from BBB-, with a stable outlook, marking the country’s first upgrade in 18 years. The agency, the world’s largest, cited India’s strong growth momentum and resilient fundamentals, calling it “among the best performing economies in the world.”

According to S&P, India’s real GDP averaged 8.8% growth between FY22 and FY24, the highest in Asia-Pacific, and is expected to expand at 6.8% annually over the next three years. The agency highlighted that India’s growth is largely domestic consumption-driven, cushioning it against global headwinds such as U.S. tariffs and volatility in energy imports.

While the BBB rating still places India at the lowest investment-grade level, the upgrade is a step closer to the coveted ‘A’ category, which signals higher creditworthiness to global investors. Analysts believe this will encourage greater foreign capital inflows, lower borrowing costs, and strengthen the rupee.

The Finance Ministry welcomed the move, crediting fiscal consolidation, infrastructure expansion, and inclusive growth strategies. India has long argued that ratings agencies undervalue emerging economies, even devoting a chapter in the Economic Survey 2020-21 to question their methodologies.

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S&P also noted progress on public finances, projecting the combined fiscal deficit of Centre and states to decline from 7.3% of GDP in FY26 to 6.6% by FY29, alongside rising capital expenditure on infrastructure, now about 5.5% of GDP, higher than many peers. Debt levels, too, are expected to fall toward pre-pandemic levels by the decade’s end.

Despite moderating GDP growth to 6.5% in FY25, S&P said India’s expansion is “normalizing toward a more sustainable level.” It cautioned, however, that long-term growth must generate jobs and reduce inequality to fully leverage the country’s demographic advantage.