FinMin sees S&P upgrade as milestone on road to Viksit Bharat 2047

FM Nirmala Sitharaman

Welcoming India’s sovereign rating upgrade by S&P Global Ratings, the Finance Ministry said the country will sustain its buoyant growth momentum and push ahead with economic reforms to attain the goal of Viksit Bharat or developed economy status by 2047.

S&P Global upgraded India's long-term sovereign credit ratings to ‘BBB’ from ‘BBB-’ and its short-term rating to ‘A-2’ from ‘A-3’, with a Stable outlook, citing economic resilience and sustained fiscal consolidation, a statement said on August 14.

This marks the first ratings upgrade by S&P since January 2007, when India was raised to ‘BBB-’. A ‘BBB’ rating is considered the lowest rung of investment grade, signalling adequate capacity to meet financial commitments while being subject to moderate credit risk.

In a post on social media platform X, the Finance Ministry said, “India has prioritised fiscal consolidation, while maintaining its strong infrastructure creation drive and inclusive growth approach, that has led to the upgrade.” The country’s leadership has provided stability, and India’s economy is “truly agile, active, and resilient,” it added.

S&P’s move follows DBRS’s recent decision to raise India to BBB status earlier this year.

The upgrade, which follows S&P’s decision in May last year to raise India’s outlook to positive, emphasises improved macroeconomic fundamentals, fiscal discipline, and sustained growth momentum despite external uncertainties.

Economists

Economists and market experts believe the revision will improve India’s investment attractiveness.

“The rating upgrade by S&P recognises the fiscal consolidation efforts by the government over the last few years and improving long-term growth prospects due to the significant improvement in infrastructure, logistics and ease of doing business in the country," said Sakshi Gupta, Principal Economist at HDFC Bank. "The upgrade is likely to be a positive not just for the bond market but also for the medium-term prospects of attracting foreign investments. While tariff risks and slowdown in global growth continue to loom over the growth outlook for this year, the continued strength of the domestic economy, particularly rural, could provide some cushion.”

Radhika Rao, Executive Director and Senior Economist at DBS Bank, noted that the move brings India “on par with Indonesia and Mexico” within the investment grade universe. “Positive impetus on the back of this upgrade will help lower the credit premium on the sovereign’s debt as well as further ease corporates’ offshore borrowing costs. This upgrade is driven by improvement in the economy’s macro backdrop, including material progress towards fiscal consolidation goals,” she said, adding that the Budget’s focus on aligning deficits with debt levels will help reduce fiscal risks in the coming years. She also highlighted favourable assessments on India’s external balance, with strong reserves, narrow current account deficits, contained external debt levels, and robust reform commitments.

Vishal Goenka, Co-Founder of IndiaBonds.com, said the development is already being felt in financial markets. “India just upgraded by S&P to BBB with Stable Outlook. The government bond market is rallying on this news, as this would encourage more foreign and FPI inflows into the bond markets. A higher Credit Rating systematically gets more investments into the country as risk-adjusted returns are better. We see India remaining in the global spotlight for Emerging Market favourable asset allocation and bond yields to fall in the short term.