S&P backs India’s growth story, retains BBB rating

New Delhi: S&P Global Ratings on Thursday retained India’s sovereign credit rating at ‘BBB’ with a stable outlook, citing its dynamic and fast-growing economy, strong external balance sheet and policy predictability.

The agency said India’s economic fundamentals remain sound and are expected to support robust growth over the next two to three years, despite the impact of high energy prices and challenging agricultural conditions.

S&P forecast India’s growth to slow to 6.6 per cent this fiscal, from an average annual growth of 7.9 per cent during fiscal 2022-26. However, it expects growth to average 7 per cent annually over the next three years.

“The sovereign credit ratings on India are anchored by a dynamic and fast-growing economy, strong external balance sheet, and stable institutions that support policy predictability,” S&P said.

The agency said continued policy stability and high infrastructure investment would support India’s long-term growth prospects. Stable fiscal and monetary policies, along with strong growth, are also expected to help moderate the government’s elevated debt and interest burden.

However, S&P flagged weak fiscal performance, a burdensome government debt stock and low GDP per capita as key constraints on the rating.

The ‘BBB’ rating is the lowest investment-grade rating, indicating that India remains within the investment-grade category but faces greater credit risks than countries with higher ratings.

S&P said the stable outlook reflects its expectation that economic and policy stability will continue over the next 24 months. 

What does it mean?

♦ A stronger rating can help improve investor confidence and potentially lower borrowing costs for the government and Indian companies

♦ However, the BBB rating also highlights concerns over high government debt and fiscal deficits

♦ Earlier this month, Fitch Ratings also affirmed India’s sovereign rating at

♦ ‘BBB-, citing the resilience of the domestic economy