VOIWORLD/DESK
In a significant boost to investor confidence, credit ratings agency S&P Global on Thursday upgraded India’s long-term unsolicited sovereign credit rating to ‘BBB’ from ‘BBB-’, citing robust economic expansion, sustained fiscal consolidation and policy stability.
Why the upgrade?
Strong economic growth and policy stability.
Sustained fiscal consolidation and political commitment to maintaining healthy public finances.
Robust infrastructure investment drive.
Economic Performance & Outlook
India remains one of the world’s best-performing economies.
GDP averaged 8.8% growth from FY22 to FY24 post-pandemic.
Projected GDP growth: 6.8% annually over the next three years; 6.5% in 2025.
Growth underpinned by strong domestic consumption (60% of GDP) and public investment.
Risks Identified
Possible downgrade if fiscal consolidation weakens or long-term growth slows structurally.
Potential upgrade if fiscal deficit narrows significantly and government debt falls below 6% of GDP.
Impact of U.S Tariffs
US imposed additional 25% tariff on Indian imports due to oil imports from Russia.
S&P sees the impact as manageable due to India’s lower trade dependence.
Even a 50% tariff would likely cause only a one-off, marginal hit to growth.
Key Policy Support
Continued monetary policy focus on managing inflation expectations.
Anticipated policy continuity post-elections to support economic reforms and fiscal discipline.
Even as the US is India’s largest trading partner, S&P Global does not see a material drag on growth in the event of imposition of 50 per cent US tariff. It concluded that the tariff may result in a one-off hit to growth, and the overall impact will be marginal and will not derail India’s long-term growth prospects.
