Rating agency Morningstar DBRS upgrades India to 'BBB' on structural reforms

Global rating agency Morningstar DBRS upgrades India to ‘BBB’

Global credit rating agency Morningstar DBRS has on May 9 upgraded India's long-term Foreign and Local Currency - Issuer Ratings to BBB from BBB (low), citing efforts at structural reforms and fiscal consolidation.

The firm also upgraded the country's Short-Term Foreign and Local Currency - Issuer Ratings to R-2 (high) from R-2 (middle), adding that the trend on all the ratings have returned to 'Stable' from 'Positive'.

"The upgrade reflects Morningstar DBRS' view that the cumulative and ongoing benefits of India's structural reform efforts are facilitating fiscal consolidation and helping sustain India's high potential growth rate. The upgrade also reflects a more resilient banking system," the agency said.

According to Morningstar DBRS, the successful implementation of reforms, infrastructure investment and rapid digitalization have driven India's recovery in the post-pandemic period, with the country's GDP expanding on an average by 8.2 percent between FY22 and FY25.

Indian banks are well-positioned to support the country's growth, with its ratio of NPA loans falling to a 13-year low of 2.5 percent, the agency said. "From a cyclical perspective, the country's macroeconomic balances look healthy," it added.

"While the imposition of US tariffs adds uncertainty to the outlook, India looks comparatively well-positioned, given the low level of goods exports to the US and the domestic-driven nature of the Indian economy," Morningstar DBRS said. It also noted that IMF's April 2025 World Economic Outlook projected India to remain one of the world’s fastest growing economies through the end of the decade. Read More

The Finance Ministry issued a statement, welcoming the upgrade.

"The credit rating may be further upgraded if India continues to implement reforms that raise the investment rate, enhancing medium-term growth prospects. The report also stated that despite the current public debt levels, risks to debt sustainability are limited due to local currency denomination and long maturity structures. Further, continued reforms and a reduction in the public debt-to-GDP ratio could bring further upgrades," it said.