Morningstar DBRS, a leading global credit rating agency, has upgraded India’s sovereign credit rating from ‘BBB (low)’ to ‘BBB’ while maintaining a stable outlook.
This marks a significant milestone for India as it reflects growing global confidence in the country’s economic resilience, prudent fiscal management, and robust reform agenda.
The upgrade comes amid a challenging global economic environment and reaffirms India’s position as one of the fastest-growing major economies, supported by strong macroeconomic fundamentals and structural reforms.
Key Drivers of the Upgrade
- Structural Reforms and Fiscal Consolidation: The agency acknowledged India's sustained structural reforms, including investments in infrastructure and digitalization, which have facilitated fiscal consolidation and supported high potential growth rates.
- Macroeconomic Stability: India's macroeconomic indicators remain robust, with inflation returning to the Reserve Bank of India's tolerance band of 4% (±2%), a stable external sector, and a sound policy framework that has helped the economy navigate challenging global conditions.
- Resilient Banking Sector: The Indian banking system has shown marked improvement, with non-performing loans dropping to a 13-year low of 2.5%, and banks maintaining high capital adequacy ratios.
- Strong Growth Prospects: India's economy has demonstrated strong growth, with an average GDP expansion of 8.2% from FY22 to FY25, underpinned by favorable demographics, high domestic savings, and technological advancements.
Outlook and Future Considerations:
While the upgrade reflects confidence in India's economic fundamentals, Morningstar DBRS noted that the public debt-to-GDP ratio remains elevated at 80.2% in FY25. However, the risks are mitigated by the local currency denomination and long maturity structure of government borrowings. Further upgrades are possible if India continues its reform momentum and reduces its debt-to-GDP ratio.
This upgrade positions India favorably among global investors, highlighting its economic resilience and commitment to structural reforms.