On 14th August, S&P Global, the finance rating agency, upgraded India’s rating from ‘BBB-’ to ‘BBB’ after 18 years since the last time in 2007. It stated that India’s growth, credibility of public policy, and fiscal consolidation are the main drivers for this change. Other agencies like Fitch have continued a ‘BBB-’ rating since 2006, and Moody’s rating has been ‘Baa3’ since 2020. Reflecting on the current situation, S&P further stated that India will be able to manage the impact of US tariffs as its economy is mostly driven by domestic demand and less by global supply.
The revision has been made following the 2024 change, where India’s growth was marked as ‘positive’ due to its resilience and strong fiscal policy.
India is expected to face 50% tariffs from the US due to its oil imports from Russia; the US assumes that India is funding the war between Russia and Ukraine. India’s GDP growth rate between 2022 to 2024 has been around 8.8%, which was the highest in the Asia-Pacific region. It has taken over Japan to become the fourth largest economy and is expected to grow at 6.6% for the coming three years. S&P has stated that this trajectory, followed by strong monetary policy support, is helping the Indian government manage its debt-to-GDP ratio despite a huge fiscal deficit.
The Finance Ministry has responded to the upgrade, saying that it hopes for the country to become a developed one by 2047, which will mark the 100th anniversary of India’s independence and continue the same pattern of economic development. India’s transfer and convertibility assessment has also improved from ‘BBB+’ to ‘A-’, showing a positive growth on the external front despite the current geopolitical trends. After the announcement Indian rupee strengthened from 87.66 to 87.58 against the US dollar. The agency has also stated that it expects India’s debt-to-GDP ratio will come down significantly by 2029.
The US-based credit agency has also praised India as one of the best economies and has emphasised that the rating will further improve if India continues on the same path.
