Why in news?
After 18 years, rating agency S&P Global upgraded India’s long‑term sovereign credit rating from BBB‑ (the lowest investment‑grade notch) to BBB. The agency cited improved economic resilience, steady reforms and fiscal consolidation as reasons for the upgrade.
Understanding credit ratings
Credit rating agencies assess the ability of governments and companies to repay debt. Investment‑grade ratings (BBB and above) signal that borrowers are relatively safe, which lowers their borrowing costs. Higher ratings attract more foreign investment and widen access to global capital markets.
Reasons for the upgrade
- Strong growth prospects: India is projected to remain one of the fastest‑growing major economies, supported by domestic consumption, infrastructure spending and digital expansion.
- Fiscal discipline: The government has been narrowing its fiscal deficit, improving tax collection and targeting subsidies more efficiently.
- Reforms: Structural reforms such as the Goods and Services Tax, Insolvency and Bankruptcy Code and efforts to improve the ease of doing business have strengthened institutional frameworks.
- Stable monetary policy: The Reserve Bank of India has kept inflation within its target band and maintained financial stability.
Implications for India
The upgrade is likely to increase investor confidence, making it cheaper for the government and companies to borrow abroad. A higher rating also recognises policy continuity and may pave the way for future upgrades if reforms continue and public finances improve further.