The finance ministry on Thursday responded positively to S&P's sovereign rating upgrade as a big endorsement of India's economic development and sound fiscal discipline.
It is the first time in 18 years that S&P has upgraded India's sovereign rating, with the earlier upgrade in 2007 when India was upgraded to investment grade at BBB-, as per a statement issued by the ministry.
Earlier during the day, S&P upgraded India's sovereign credit rating to 'BBB' with a stable outlook, attributing this to sustained economic growth, political support for fiscal consolidation, and monetary policy helpful in managing inflation. In May 2024, the agency had changed India's outlook from 'Stable' to 'Positive'.
S&P's review of the rating mentions some of the important reasons for the upgrade: India's resilient economic growth, the government's ongoing commitment to fiscal consolidation, enhanced public expenditure quality—particularly on infrastructure and capital spending—and solid corporate, financial, and external balance sheets. The agency also referred to credible inflation management and rising policy predictability as important factors.
The report highlights India as one of the fastest-growing large economies in the world, with real GDP growth of 8.8% on average between FY22 and FY24, highest in the Asia-Pacific region. Monetary policy adjustments, especially the inflation-targeting framework, have anchored inflation expectations and general price stability, even in the face of global pressures and cost shocks.
S&P also acknowledged that continuous refinements in monetary policy, combined with the development of deep domestic capital markets, have led to a more stable and conducive economic climate. India's financial and external positions are strong, and democratic institutions continue to ensure policy continuity and long-run economic stability.
In the forward looking, the agency forecast FY26 GDP growth of 6.5%, with sustained momentum over the next three years. It also suggested a narrowing fiscal deficit and persistent public investment could set the stage for further rating upgrade.
In terms of trade, the report said the impact of recent US tariffs would be contained due to India's vast and resilient domestic consumption base, the ministry added.
