Japan rating agency upgrades India's sovereign credit outlook

New Delhi: Japan's largest rating agency Rating and Investment Information (R&I) on Friday upgraded its sovereign rating on India to 'BBB+' from 'BBB', citing the country's robust economic growth, fiscal discipline and external stability. It has maintained a stable outlook.

This marks the third sovereign rating upgrade for India in 2025 and could result in lower overseas borrowing costs for domestic entities and a boost for investor confidence. It also underscores the economy's resilience amid global headwinds, including an extra 50% US tariff on most Indian goods.

S&P last month raised its rating on India to 'BBB' from the lowest investment grade of BBB- while Morningstar DBRS had upgraded it to 'BBB' from BBB (low) in May.


However, Moody's and Fitch retain their ratings of the country at the lowest investment grade. R&I said the additional US tariff may pose a risk to the economic outlook, but India's growth is mainly driven by domestic factors and its dependence on exports to the US is not high.

Also, the GST cuts, effective September 22, will limit the negative tariff impact, it added. Responding to the rating upgrade, the finance ministry said it reaffirms India's position as "one of the most dynamic and resilient major economies in the world." The Japanese agency acknowledged India's progress in reducing the fiscal deficit, supported by tax revenues, cut in subsidies, and a manageable level of debt.

It also praised India's enhanced external stability, citing a modest current account deficit, stable surpluses in services and remittances, low external debt-to-GDP ratio, and adequate foreign exchange reserves. The economy grew at a better-than-expected pace of 7.8% to hit a five-quarter high in the April-June period.

It had expanded 6.5% last fiscal. R&I expects India's growth to remain in the mid-6% range from FY26 onwards, supported by factors such as population growth, the catch-up effect of income, public investment, and economic policy. It also pitched for accelerating reforms for India to realise the goal of emerging as a developed nation by 2047.

Meanwhile, the finance ministry said the government remains committed to inclusive, high-quality growth alongside fiscal prudence and macroeconomic stability.