The rating of India did not capture the country’s fundamentals for almost a decade, and the current rating action by S&P reaffirms the position that India’s rating ought to have been on the higher side, which is no surprise, according to a report by SBI Research.
According to the report, S&P India’s projection for real GDP growth at 6.5 per cent is on the more pragmatic side when compared to other forecasts.
The rating agency also predicted that US tariffs will have an overall marginal impact and will not derail India’s long-term growth prospects.
This is because, with sectoral exemptions on pharmaceuticals and consumer electronics, the exposure of Indian exports subjected to tariffs is lower at 1.2 per cent of GDP.
The current account deficit is expected to be in the range of 1.0-1.4 per cent for 2025-2028. CPI is expected in the range 4-4.5 per cent till 2028, SBI Research said, quoting S&P ratings projection report.
The agency acknowledged that the quality of government spending has improved in the past five to six years, with higher budget allocation to capex spending at 3.1 per cent. The global rating agency also recognised that India’s inflationary expectations are better anchored than they were a decade ago.
The agency projected that the ratio of general government debt to GDP to decline to 78 per cent by fiscal 2029, from 83 per cent in fiscal 2025.
S&P Global Ratings, in its latest report, raised its long-term sovereign credit ratings on India to BBB from BBB– in August 2025 with a stable outlook.
The rating agency also upgraded the transfer and convertibility assessment to A–, which is the risk that a government imposes capital or exchange controls that prevent an entity from converting local currency into foreign currency and/or transferring funds to creditors located outside the country.
Earlier, S&P had revised the outlook on India’s rating in May 2024 to positive from stable on robust growth and improved quality of government expenditure.
The rating action hinges on three fundamental observations— credible fiscal consolidation, strong external position and well-anchored inflationary expectations.
The downside to rating stems from a lack of political commitment to fiscal consolidation. Accordingly, continued reforms and a reduction in the public debt-to-GDP ratio could bring further upgrades, SBI research stated.
