S&P Global Ratings Upgrades India's Long-Term Sovereign Rating to BBB, Reflecting Investor Confidence and Strong Fiscal Management.
S&P Global Ratings: U.S. President Donald Trump recently criticized India's economy, calling it a "dead economy." However, this statement has now been countered not by a political opponent but by the global ratings agency S&P Global Ratings. On Thursday, S&P upgraded India's sovereign credit rating from BBB- to BBB. Additionally, the short-term rating was raised from A-3 to A-2. This upgrade is the first rating improvement India has received in 19 years and is viewed as an investment-grade level.
In its statement, S&P said that India is prioritizing fiscal consolidation and demonstrating a political commitment to ensuring sustainable public finances, along with building b infrastructure. The rating agency believes that India's economic base is b, and improved monetary policy measures are helping to control inflation.
Reason for Rating Upgrade: Strong Economic Growth and Fiscal Consolidation
S&P stated that the long-term sovereign rating was upgraded due to the ongoing improvements in India's economy and b fiscal management. The main drivers of the rating upgrade are b economic growth, political commitment to fiscal consolidation, and better monetary policy measures to keep inflation under control.
S&P also mentioned that the impact of U.S. tariffs on India's economy can be managed. According to the agency, India's dependence on global trade is relatively low, and approximately 60 percent of economic growth comes from domestic consumption. Therefore, even if the U.S. imposes a 50 percent tariff, it would not have a significant impact on the economy's growth.
Indian Economy Remains Strong Despite U.S. Tariffs
The U.S. plans to impose tariffs of up to 50 percent on Indian goods starting August 27. Despite this, S&P believes that India's economy can face this challenge. According to the agency, improved creditworthiness for Indian companies means that borrowing costs in international markets will decrease, which will help investment and business.
S&P also said that India is relatively less dependent on trade. About 60 percent of its economic growth comes from domestic consumption, so U.S. tariffs will not have a major impact on overall economic growth. This statement is considered a direct response to Trump's statement calling India a "dead economy."
First Rating Upgrade in 19 Years
In January 2007, S&P placed India at the lowest investment grade level of BBB-. Now, after 19 years, it has been raised one notch higher to BBB. This upgrade indicates that India is demonstrating its ability to repay its debt more effectively. S&P had already changed India's credit rating outlook from stable to positive in May of last year, signaling that a rating improvement was possible in the next 24 months.
The rating upgrade will make India more attractive for international investment and increase the confidence of foreign investors. This will not only accelerate business but also increase the likelihood of financial assistance for new industries and startups.
Economic Recovery After the Corona Pandemic
S&P stated that India has rapidly recovered from the impact of the Corona pandemic, establishing itself as one of the best-performing emerging economies in the world. Economic expansion is now moving towards a more sustainable and durable level. According to S&P, the strength of consumer and public investment could push real gross domestic product (GDP) growth to 6.5 percent in fiscal year 2025-26 and is expected to grow at an average of 6.8 percent over the next three years.
