India Pushes for Credit Rating Upgrade: A Deep Dive into Economic Strength

In a strategic move, India's finance ministry recently made a strong case to S&P Global Ratings, advocating for an upgrade to the country's sovereign credit rating. This follows a similar high-level discussion with Moody's earlier this month. The government's pitch is built on India's robust economic growth outlook and a range of impressive macroeconomic indicators, all set against a backdrop of global uncertainty.

Why India Deserves an Upgrade

S&P currently assigns India its lowest investment grade rating of 'BBB-', though it did upgrade the outlook to "positive" from "stable" last year, a significant shift after a decade. Moody's and Fitch maintain similar ratings of 'Baa3' and 'BBB-', respectively, both with stable outlooks.

During the June 24 meeting with S&P, senior finance ministry officials, led by Chief Economic Advisor V. Anantha Nageswaran, highlighted several key factors supporting their request for an upgrade:

Sustained Economic Growth: India has consistently been the world's fastest-growing major economy since 2021-22. The International Monetary Fund (IMF) projects this impressive momentum to continue at least until 2026-27, with growth rates for India more than double the global average. In fact, the IMF forecasts India's growth at 6.2% for the current fiscal year and 6.3% for the next. S&P itself recently raised its 2025-26 India growth projection to 6.5% from 6.3%.

Easing Inflation: India has made significant strides in taming inflation. The Reserve Bank of India (RBI) projects retail inflation for 2025-26 at a comfortable 3.7%, which is even below its medium-term target of 4%.

Improving Debt-to-GDP Ratio: The government has a clear roadmap to reduce its debt. The general government debt eased to 80.4% of GDP in 2025 from 88.4% during the pandemic year of 2020. The central government aims to further trim its debt to 50% (plus or minus 1%) of GDP by FY31 from an estimated 57.1% in FY25.

Strong External Sector: India's external sector remains resilient. The country boasts adequate foreign exchange reserves, providing import cover for approximately 11 months. Steady services exports and consistent remittance inflows continue to bolster India's current account. Even with recent depreciation against the U.S. dollar, the Indian rupee remains one of Asia's best-performing currencies.

These compelling indicators paint a picture of an economy not just growing rapidly but also managing its finances prudently and maintaining external stability. The government hopes these strong fundamentals will convince rating agencies to acknowledge India's improved economic health with a well-deserved upgrade.