S&P Global Ratings has upgraded India’s long-term sovereign credit rating to ‘BBB’ from ‘BBB-’, with the short-term rating raised to ‘A-2’ from ‘A-3’. This is India’s first sovereign upgrade in 18 years, the last being in 2007, and is being seen as a strong endorsement of the country’s economic fundamentals, fiscal discipline, and policy stability. The move is significant not only because it breaks a long period of rating stagnation but also because it signals renewed global confidence in India’s growth story.
The upgrade comes on the back of several factors. First, India has pursued an aggressive path of fiscal consolidation after the pandemic, reducing the Centre’s fiscal deficit from 9.2% of GDP in 2020-21 to 4.8% in FY25, with a further target of 4.4% in FY26. Debt-to-GDP is also projected to decline steadily to around 50% by 2030-31. Second, India’s growth momentum remains robust. Despite global challenges, India clocked 6.5% growth in FY25, with S&P projecting an average of 6.8% growth over the next three years, placing it among the fastest-growing major economies. Third, inflation has been managed effectively under the Reserve Bank of India’s inflation targeting framework, with headline CPI falling to 1.55% in July 2025, the lowest since 2017. Finally, a strong push in infrastructure investment, with public spending expected to reach 5.5% of GDP, has strengthened long-term growth prospects.
The upgrade matters because sovereign ratings serve as a financial report card. A higher rating reduces borrowing costs for the government, companies, and households, while also opening access to new pools of global capital. Following the announcement, bond yields fell, the rupee gained strength, and S&P also raised ratings for several Indian banks, NBFCs, and PSUs, underlining broader financial sector stability.
India now stands at BBB in the rung of the investment grade ladder. Countries like Greece, Mexico, and Indonesia share the same bracket, while moving up to BBB+ would place India alongside Italy and Thailand. Though the upgrade is a milestone, S&P has kept a stable outlook and indicated that further improvements would require the combined Centre and state deficit to fall below 6% of GDP.
Even so, the upgrade validates India’s long-standing position that its fundamentals were stronger than previous ratings suggested. The government has consistently argued that global rating agencies undervalued emerging economies like India, with even the Economic Survey of 2020-21 openly questioning their fairness. Now, with fiscal consolidation, monetary stability, and reforms under Prime Minister Narendra Modi’s leadership, India’s case has finally been acknowledged.The implications are clear: lower borrowing costs, higher investor confidence, and greater inflows of global capital to support infrastructure, employment, and broad-based growth. While challenges remain in achieving deeper fiscal consolidation, India’s growth trajectory and policy credibility point to a steadily rising position in global markets. The S&P upgrade is not just symbolic but a marker of India’s progress toward becoming a more resilient and investment-attractive economy.
