India gets a rating upgrade from S&P – About time as well

India has just achieved a historic milestone: global ratings agency S&P Global has upgraded the country’s long-term sovereign credit rating to “BBB” from “BBB–” after nearly two decades, marking its first upgrade since 2007. This move raises India to the third lowest investment grade, a notch above the minimum, and is a strong vote of confidence in the country’s economic prospects and policy discipline.

S&P cited several reasons for the upgrade. The foremost is India’s buoyant and sustained economic growth. The nation continues to be one of the fastest growing major economies in the world, with real GDP growth averaging 8.8% from FY22 to FY24, outpacing most of the Asia Pacific. The agency projects a healthy 6.5 to 6.8% annual GDP expansion for the next three years, supported by robust domestic demand and significant public investment in infrastructure.

Another critical factor is the government’s dedication to fiscal consolidation, reducing the fiscal deficit while maintaining high quality spending, particularly in capex and infrastructure. S&P also lauded India’s improved monetary policy framework, especially its inflation targeting regime, which has anchored inflation expectations even amid global shocks and fluctuating commodity prices.

The agency notes India’s resilient external and financial positions and stable democratic institutions promote policy continuity and economic stability. While recent US tariffs on Indian exports made headlines, S&P believes their effect will be limited, given India’s dominant domestic consumption base (accounting for about 60% of GDP).

This upgrade signals increased international confidence, likely making Indian government bonds and corporate debt more attractive, potentially lowering borrowing costs and boosting foreign investment. It also marks a new era: recognition that India’s reforms, resilience, and growth orientation are paying off, bolstering its journey toward becoming a developed economy by 2047.