S&P Global Upgrades India's Rating From 'BBB-' To 'BBB'

India Rating Upgrade: Ahead of the highly-anticipated Trump-Putin meet and amid a fresh tariff threat issued by the US, S&P Global raised India's sovereign rating to BBB from the earlier 'BBB-' .

The first time soverign rating upgrade for India since 2017 comes during a period where the US has already imposed 50 per cent tariff on Indian imports, and warned against a further escalation if talks between US-Russia over energy trade does not ease tensions over the same. 

The Manhattan-headquartered rating agency said not to expect 50 per cent tariffs by the US to pose a material slowdown on growth, if the south Asian nation diversifies its oil imports from Russia to other alternatives. This would make the fiscal cost modest, it said.

This is also marks the first time India has received a soverign rating upgrade since 2017.

The financial intellegence provider also said India will meet its deficit target announced for budget fiscal 2026 as the country's corporate & financial sectors have stronger balance sheets than before the pandemic

"At the same time, we revised our transfer & convertibility assessment to 'A-' from 'BBB+'", according to a statement. Meanwhile, India's benchmark 10-year bond yield dropped 7 basis points since opening on Thursday, dropping to 6.4 per cent.

Also Read: US Warns of Escalating tariffs on India

On the other hand, S&P Global said, “The stable outlook reflects our view that continued policy stability and high infrastructure investment will support India's long-term growth prospects. That, along with cautious fiscal and monetary policy that moderates the government's elevated debt and interest burden, will underpin the rating over the next 24 months."

Additonally, downward pressure could also come from India's economic growth slowing materially on a structural basis such that it undermines fiscal sustainability, the rating agency said. The upgrade of India reflects its buoyant economic growth, against the backdrop of an enhanced monetary policy environment that anchors inflationary expectations, the agency believes.

"Together with the government's commitment to fiscal consolidation and efforts to improve spending quality, we believe these factors have coalesced to benefit credit metrics," S&P said. The global rating firm sees India's gross domestic product increasing 6.8% annually over the next three years. This has a moderating effect on the ratio of government debt to GDP despite still-wide fiscal deficits, it said.

The impact of US tariffs on Indian exports will be manageable, according to S&P.

"We expect that in the event India has to switch from importing Russian crude oil, the fiscal cost, if fully borne by the government, will be modest given the narrow price differential between Russian crude and current international benchmarks," the rating agency said.