S&P’s top sovereign ratings executive says India’s first upgrade in 18 years based on a long-term view

S&P Global’s India credit rating upgrade to 'BBB' has been welcomed by economists, citing that it reflects prudence in India’s fiscal policy.

Rating agency S&P Global has taken a long-term view on India’s economic trajectory as it upgraded New Delhi’s credit rating after 18 years, citing measures supporting economic growth, said YeeFarn Phua, its Director of Sovereign & International Public Finance Ratings for Asia.

Speaking to CNBC-TV18 after the announcement, Phua said the credit agency believed this to be the right time to upgrade India's sovereign rating. “…we took a long-term view on this. The outlook has changed a couple of times. But this time, we are recognizing the strong efforts the government has been putting into economic reforms, driving growth and allocating a lot of this spending to infrastructure as well. All of this has helped to boost economic growth in the last few years,” said Phua.

S&P Global’s India credit rating upgrade to 'BBB' has been welcomed by economists, citing that it reflects prudence in India’s fiscal policy.

Phua said the credit ratings agency has begun to see a lot of India’s economic growth flow into credit metrics, and is hoping to see a much better trajectory in the coming years.

He added that the government has done a very good job in driving the economy towards healthy growth. “Allocating less of the Budget towards subsidies but more towards infrastructure investments will help India to see an even better economic trajectory than what it is seeing now,” Phua added.

When asked about the possible impact from Trump’s 50 percent tariff on India’s economy, Phua said India’s economy does not depend too much on exports. “Only around 2 percent of Indian exports go to the US... Ultimately, the exposure to the US in terms of GDP to the exports in only around 1 percent. So even if there are 50 percent tariffs, we do not think it will impact India’s growth story. It could have some sort of short-term impact, but we expect that to be manageable. Over the long term, we believe India’s growth prospects remain strong.”

Also Read: Rating upgrade from S&P reflects the impact of prudent fiscal policy, say economists

After the report was published, the Finance Ministry took to X to welcome the upgrade. "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 rating upgrade comes after an 18-year gap. The ratings upgrade reaffirms that under Prime Minister Shri Narendra Modi's leadership, providing stability, India’s economy is truly agile, active, and resilient," the ministry said.