Citing India’s “solid” economic growth, the effectiveness of policies aimed at strengthening the foundations for growth, and the improved soundness of the financial system, Japanese credit rating agency (JCR) has upgraded India’s sovereign rating (Foreign Currency and Local Currency Long-term Issuer Ratings) to ‘A-’ from ‘BBB+’, with a stable outlook. JCR said India is likely to maintain a high growth rate of more than 6% in the current fiscal (FY27), supported by a population of more than 140 crore and a nominal Gross Domestic Product (GDP) of $3.9 trillion. The agency noted that the Indian economy has maintained a high growth rate of around 7%, driven by robust private consumption and public investment.
JCR’s ‘A-’ rating indicates a high level of certainty that a country will honour its financial obligations, while a ‘BBB+’ rating denotes an adequate level of certainty. In its assessment, JCR also noted that India faces structural challenges that tend to keep fiscal deficits elevated, including fiscal transfer arrangements aimed at reducing disparities among states and fiscal management that remains susceptible to electoral cycles. In recent years, however, the government has restrained the growth of current expenditure, including subsidies, while placing greater emphasis on capital expenditure, particularly infrastructure investment. As a result, the quality of fiscal expenditure has improved.
JCR said the central government’s debt-to-GDP ratio stood at 56.1 per cent at the end of FY26 and is expected to decline gradually. However, general government debt, including that of state governments, and the associated interest burden remain high. It said “JCR will continue to monitor whether government capital expenditure can induce private investment and reduce the economy’s dependence on government spending while sustaining economic growth”. JCR also noted that India’s current account deficit remains contained, supported by a surplus in the services balance. The country’s foreign exchange reserves are ample and significantly exceed its short-term external debt, providing India with strong resilience against external shocks.
