S&P Global Ratings has raised India’s sovereign credit rating to BBB from BBB-, with a stable outlook, marking the first upgrade in 18 years, The Indian Express reports. The move positions India closer to the coveted ‘A’ category, signalling greater creditworthiness to global investors.

The last upgrade by the US-based agency, the largest of its kind, came in January 2007. This latest revision reflects India’s position as one of the world’s best-performing economies, with real GDP growth between fiscal years 2022 and 2024 averaging 8.8% - the highest in the Asia-Pacific region. Growth over the next three years is projected at an average of 6.8% annually.

S&P assesses countries on institutional, economic, external, fiscal and monetary criteria. A BBB rating indicates adequate capacity to meet financial commitments, though with greater susceptibility to adverse economic conditions.

The agency downplayed the potential economic damage from the 25% US tariff on Indian goods - later doubled to 50% - imposed in response to New Delhi’s imports of Russian arms and energy. While some economists have warned of a growth reduction of up to 0.5 percentage points, S&P considers the effect manageable. India’s relatively low reliance on trade and its strong domestic consumption base are seen as key buffers. Any fiscal impact from replacing Russian crude imports is expected to be modest due to the narrow price gap between Russian and global benchmarks.

The Indian government welcomed the decision, pointing to fiscal consolidation alongside sustained investment in infrastructure and inclusive growth as central to the improved outlook. Officials have long pressed the three major agencies - S&P, Moody’s and Fitch - for higher ratings, arguing that existing methodologies underestimate the fundamentals of emerging markets.

Despite still sitting at the lowest rung of investment-grade ratings, the upgrade is expected to encourage greater foreign capital inflows, potentially strengthening the rupee and lowering borrowing costs for both the government and private sector. The timing of the announcement comes amid heightened geopolitical tensions and tariff disputes with the US.

India’s GDP growth eased to 6.5% in 2024–25, the slowest in four years, with the Reserve Bank of India forecasting a similar pace for the current fiscal year. S&P said this reflected a normalisation to more sustainable levels, supported by strong underlying momentum. However, it noted that sustained high growth will be necessary to generate jobs, reduce inequality and fully realise the country’s demographic advantages.

Retail inflation has broadly remained within the Reserve Bank’s 2-6% target range, enhancing the central bank’s record on price stability.