S&P retains India’s sovereign rating at ‘BBB’ with stable outlook

28 Aug 2026 Evaluate

S&P Global Ratings has retained India’s sovereign rating at ‘BBB’ with a stable outlook, and said that the country is a dynamic and fast-growing economy supported by policy stability and high infrastructure investment. In August last year, the rating agency upgraded India’s long-term sovereign credit rating to ‘BBB’ from ‘BBB-’, marking the first upgrade in 18 years. The ‘BBB’ rating is an investment-grade rating, indicating that India has adequate capacity to meet its financial commitments, although it remains more vulnerable to adverse economic conditions than higher-rated sovereigns. It said public investment and strong consumer momentum will underpin “solid” growth prospects for India over the next two to three years. It also expects policy continuity to support further economic reforms and fiscal consolidation.

Affirming its ‘BBB’ long-term and ‘A-2’ short-term unsolicited sovereign credit ratings on India, S&P said the ratings are anchored by the country’s dynamic and fast-growing economy, strong external balance sheet and stable institutions, which support policy predictability. The outlook on the long-term rating remains stable. The stable outlook reflects S&P’s view that continued policy stability and high infrastructure investment will support India’s long-term growth prospects. The agency said the government’s ability to fund large infrastructure investments without substantially widening the country’s current account deficit will be important. If India is able to significantly reduce its fiscal deficit while achieving these objectives, support for the sovereign rating will strengthen over time. It added that the growth outlook, together with stable fiscal and monetary policies that help moderate the government’s elevated debt and interest burden, will underpin the rating over the next 24 months.

The rating agency said high energy prices and challenging agricultural conditions are expected to marginally slow India’s growth this year, although the economy’s fundamentals are likely to remain sound and support robust growth over the next two to three years. It identified the government’s weak fiscal performance, high debt stock and low GDP per capita as key constraints on the sovereign rating. S&P said India remains one of the best-performing economies globally, although it expects GDP growth to slow to 6.6 per cent in the current fiscal year due to an ongoing energy shock and challenging agricultural conditions. The Indian economy grew 7.7 per cent in FY26.

According to S&P, more effective capital expenditure programmes, including greater participation from the private sector, could help address the widespread shortfall in physical infrastructure and, over time, enhance the economy’s productive capacity. The agency also noted that India faces gaps in the provision of basic services, particularly in rural areas. Improved physical infrastructure is a prerequisite for higher private investment and greater competitiveness. While India faces near-term inflationary pressures from elevated energy and food prices, S&P also expects inflation to remain within the Reserve Bank of India’s (RBI) target range.

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