Photo: dbrs.morningstar.com
Morningstar DBRS, a global ratings agency, has upgraded its rating of India’s long-term and short-term debt on the basis of the country’s structural reform efforts, fiscal consolidation, resilient banking system, and high potential growth rate.
India’s long-term rating was raised to BBB from BBB (low), while short-term rating was raised to R-2 (high) from R-2 (middle).
“The successful implementation of reforms coupled with infrastructure investment and rapid digitalization have helped drive India’s recovery in the post-pandemic period, with GDP expanding on average by 8.2% from FY22 (April 2021 to March 22) to FY25,” Morningstar DBRS said in its ratings rationale document. “Fiscal consolidation remains on track with improvements in transparency of government accounts and the quality of spending.”
The ratings agency also noted that inflation has returned to the Reserve Bank of India’s comfort band, and that the external sector is strong.
“While the imposition of U.S. tariffs adds uncertainty to the outlook, India looks comparatively well-positioned, given the low level of goods exports to the U.S. and the domestic-driven nature of the Indian economy,” the agency added.
However, it also raised a few concerns regarding India’s high deficits and debt levels.
“Despite recent improvements, India’s perennially large fiscal deficits and elevated government debt levels characterise the country’s credit profile,” the agency noted. “On a general government basis, the public debt-to-GDP ratio has moderated since the shock of the pandemic but remains high at 80.2% in FY25.”
Morningstar DBRS added that it could further upgrade India’s credit ratings if it does a combination of things: continues implementing reforms that raise the country’s investment rate and materially reduce the public debt-to-GDP ratio.
Published – May 10, 2025 03:08 pm IST
