Rating and Investment Information, Inc. (R&I), a prominent Japanese credit rating agency, has upgraded India’s long-term sovereign credit rating from ‘BBB’ to ‘BBB+’, while maintaining a Stable Outlook for the economy.
Third Sovereign Upgrade in 2025
This marks the third sovereign rating upgrade for India in 2025. Earlier in the year:
- Morningstar DBRS upgraded India from ‘BBB (low)’ to ‘BBB’ in May
- S&P Global Ratings upgraded India from ‘BBB-’ to ‘BBB’ in August
These successive upgrades underscore India’s robust economic fundamentals and its status as one of the world’s most resilient emerging economies.
Rationale Behind R&I’s Upgrade
R&I highlighted several factors supporting the upgrade:
- Strong Economic Growth: India continues to benefit from a demographic dividend, robust domestic demand, and sound policy measures.
- Fiscal Prudence: The government has made notable progress in fiscal consolidation, driven by higher tax revenues, rationalisation of subsidies, and controlled debt levels. The central government fiscal deficit narrowed to 4.8% of GDP in FY2024, and is targeted at 4.4% in FY2025.
- External Stability: India’s current account deficit remains modest, supported by stable services and remittance inflows, low external debt-to-GDP ratio, and adequate foreign exchange reserves.
- Financial System Resilience: R&I noted that the financial sector risks remain limited, reflecting the government’s ongoing reforms and prudent fiscal management.
Additionally, the agency recognized India’s recent structural reforms, including the plan to simplify GST to a two-tier structure, effective September 2025, aimed at improving compliance and boosting economic efficiency.
Implications
The R&I upgrade is expected to:
- Enhance investor confidence in India’s debt and equity markets
- Strengthen India’s access to international capital at competitive rates
- Support the government’s infrastructure and growth initiatives by ensuring financial stability
Summary
- Agency: Rating and Investment Information, Inc. (R&I), Japan
- Rating: Upgraded from ‘BBB’ to ‘BBB+’
- Outlook: Stable
- Key Drivers: Economic growth, fiscal consolidation, external stability, limited financial risks, and structural reforms
This upgrade reinforces India’s position as a strong, resilient economy with sound macroeconomic fundamentals and a stable investment environment.
Disclaimer:
This article is intended solely for educational and informational purposes. The securities or companies mentioned are provided as examples and should not be considered as recommendations. Nothing contained herein constitutes personal financial advice or investment recommendations. Readers are advised to conduct their own research and consult a qualified financial advisor before making any investment decisions.
Investments in securities markets are subject to market risks. Please read all related documents carefully before investing.