Mumbai: Amid concerns about India’s economic outlook after the hiked US tariffs and the corresponding stock market fall, American rating agency S&P’s rating upgrade has given investors a reason to cheer.
Perhaps the best gift India could get this Independence Day, S&P upgraded India to BBB from BBB- with a stable outlook- 18 years since it had last done so. The rating agency said India had staged a remarkable comeback after the pandemic, with growth averaging 8.8% between 2022-24, the highest in the Asia Pacific.
“We expect these growth dynamics to continue in the medium term, with GDP increasing 6.8 per cent annually over the next three years,” S&P said in a statement.
After this news broke out, India’s sovereign bond yield rose by 8 basis points, boosting investor confidence. The Indian Rupee, which has been weakening against the dollar since February this year, has also gained from the upgrade, recouping its value from the day before.
For the government, this is a welcome move, especially after its reportedly aggressive lobbying for a rating upgrade by the three global rating agencies- S&P, Moody’s and Fitch, as it wanted to showcase India’s improved fundamentals.
The Government of India welcomes the decision by S&P Global Ratings to upgrade India’s long-term sovereign credit rating to ‘BBB’ from ‘BBB-’ and its short-term rating to ‘A-2’ from ‘A-3’, with a Stable Outlook. S&P last upgraded India in January 2007 to ‘BBB-’, hence, this…
— Ministry of Finance (@FinMinIndia) August 14, 2025
Analysts have welcomed the move, as this eases the path to raising funds in the international markets.
“Though the upgrade is a welcome development, it is also too little and too late. What market participants and India-watchers have long recognised is only now being acknowledged by the rating agencies. The reality is that our economic and financial dynamism has far outpaced its perceived credit risk,” Sujan Hajra, chief economist at Anand Rathi Group, said.
Even though India upgraded rating places it in the same category as countries like Indonesia, Greece or Mexico, this is still a fairly low investment-grade rating, where global investors judge the creditworthiness of a country before investing. For the government, this could lower its overall borrowing costs and positively impact the currency exchange rate for a basket of global currencies.
S&P Global has also said it would consider raising the ratings even further if the government can narrow the fiscal deficit and reduce the government debt below 6% of GDP. However, S&P can also lower the ratings further if the government backtracks on its commitments.
