India's Sovereign Rating Upgraded from 'Stable' to 'Positive'

• 30 May 2024

On May 29th, 2024, S&P Global Rating has upgraded India's sovereign rating outlook from 'stable' to 'positive' while maintaining the rating at 'BBB'.

• The rating agency attributed this improvement to India's robust economic expansion, which positively influences its credit metrics.

Key Points

• The positive outlook on India’s sovereign rating is based on its robust economic growth, significant improvement in the quality of government spending, and strong political commitment to fiscal consolidation.
• According to S&P India’s weak fiscal settings had always been the most vulnerable part of its sovereign ratings profile, with elevated fiscal deficits, a large debt stock, and interest burden persisting.
• S&P projects India’s general government deficit to gradually decline from 7.9% of GDP in fiscal 2025 to 6.8% by fiscal 2028.
• S&P expects the Indian economy to expand at close to 7% annually over the next three years, which have a moderating effect on the ratio of government debt to GDP despite high fiscal deficits.
• India’s favorable GDP growth to interest rate differential is keeping government borrowing sustainable.
• India’s debt to GDP ratio will reduce to 81% by fiscal 2028 from the current 85%.
• The sustained increase in public investment in infrastructure will enhance economic growth dynamics, which, along with fiscal adjustments, could improve India’s weak public finances.