On August 14, 2025, S&P Global Ratings elevated India’s long-term unsolicited sovereign credit rating from BBB– to BBB, with the outlook maintained at Stable—marking India’s first upgrade in 18 years Reuters+1.
Key Factors Behind the Upgrade:
- Strong Economic Resilience: India demonstrated robust GDP growth, averaging 8.8% between FY2022 and FY2024—the highest in the Asia-Pacific region Reuters+1.
- Sustained Fiscal Consolidation: Improved expenditure quality and shrinking fiscal deficits reinforced investor confidence Reuters+1.
- Monetary Stability: A credible and effective monetary policy framework helped anchor inflation expectations Reuters+1.
- Better External Profile: India’s transfer and convertibility assessment was upgraded to A– (from BBB+), enhancing its external resilience and signaling greater confidence in its capital account stability Reuters+1.
Immediate Market Reactions:
- The Indian rupee strengthened from 87.66 to approximately 87.58 against the U.S. dollar.
- The 10-year government bond yield declined by about 7 basis points to 6.38%, reflecting increased market optimism Reuters+1.
What This Means:
- The upgraded rating underscores Indian government’s commitment to macroeconomic stability and structural reforms.
- It may lower borrowing costs, attract foreign investment, and offer greater visibility for long-term fiscal planning.
