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

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.