Overview

• S&P upgraded India’s long-term sovereign credit rating to ‘BBB’ from ‘BBB-’ and raised its short-term rating to ‘A-2’, also improving the transfer and convertibility assessment to ‘A-’ with a stable outlook.
• The agency pointed to sustained post-pandemic GDP growth, improved monetary policy credibility, enhanced spending quality and increased public infrastructure investment as key drivers of its decision.
• S&P projects real GDP growth of about 6.8% annually over the next three years and foresees the general government deficit narrowing from 7.3% of GDP in fiscal 2026 to 6.6% by fiscal 2029.
• Markets reacted positively, with the rupee firming to around 87.58 per dollar and the 10-year government bond yield falling roughly seven basis points after the announcement.
• S&P cautioned that erosion of fiscal consolidation or a structural slowdown could trigger a downgrade and signaled that further rating increases would depend on sustained deficit reduction and controlled debt additions.