‘Sovereign rating upgrade was much required’: PM EAC member Sanjeev Sanyal as S&P upgrades India to BBB

NEW DELHI: In a major move, ratings agency S&P Global has raised its sovereign credit ratings on India to ‘BBB’ from ‘BBB-‘. According to the ratings agency, India is prioritising fiscal consolidation, demonstrating the government’s political commitment to deliver sustainable public finances, while maintaining its strong infrastructure drive.

The agency further said that India’s robust economic expansion is having a constructive effect on its credit metrics, and they expect sound economic fundamentals to underpin growth momentum over the next two to three years.

The raise in sovereign credit ratings has been welcomed by Sanjeev Sanyal, Member of Prime Minister Narendra Modi’s Economic Advisory Council. “I am pleased to hear that S&P has upgraded India’s sovereign rating to BBB from BBB-. This was much required because, as I have said before, the difference between what the ratings were being given by the three big rating agencies and my own model suggested was a gap of two notches”, Sanyal said.

S&P upgrades India’s long-term sovereign rating from BBB- to BBB. The short-term rating from A3 to A2. As I have been saying, India’s rating was two notches below what would be implied by objective criteria. This marks a partial closing of the gap:https://t.co/hk34dwEQOr

— Sanjeev Sanyal (@sanjeevsanyal) August 14, 2025

Sanyal argues that given India’s economic performance other rating agencies would also raise the outlook for India.”By doing this, at least the gap has been reduced somewhat, but I would argue that given India’s economic performance, we should expect a similar upgrade by the other two agencies, as well as over the next two to three years, a further upgrade, because as I said, even after this upgrade, India is probably underrated by one notch”, Sanyal said.

Alongside the rating upgrade, S&P also revised its transfer and convertibility assessment for India to ‘A-‘ from ‘BBB+’, citing an improved monetary and external environment. India’s economic momentum was central to the upgrade decision. Real GDP growth averaged 8.8 per cent between fiscal years 2022 and 2024 — the highest in the Asia-Pacific region — and S&P expects this strength to continue, projecting average growth of 6.8 per cent annually over the next three years.

This strong growth, despite ongoing fiscal deficits, is helping to moderate the debt-to-GDP ratio. The agency said India’s reliance on domestic consumption, which drives around 60 per cent of GDP growth, offers resilience against external shocks, including recent U.S. tariffs and changes in energy import sources.

India’s fiscal position, historically a weak point in its ratings profile, is showing signs of improvement. S&P noted a gradual consolidation path, projecting the general government deficit to shrink from 7.3 per cent of GDP in fiscal 2026 to 6.6 per cent by fiscal 2029.

A key driver behind this fiscal improvement is a shift in government spending priorities. Over the past five to six years, budget allocations have increasingly favoured capital expenditure. The Union Government’s capex is set to reach INR 11.2 trillion — about 3.1 per cent of GDP in fiscal 2026, up from 2 per cent a decade ago. Including spending by state governments, total public infrastructure investment now stands at about 5.5 per cent of GDP, putting India on par with or ahead of global peers.S&P emphasised that India’s rating is underpinned by a vibrant economy, a strong external balance sheet, and democratic institutions that contribute to policy stability and predictability. (ANI)