The agency affirmed the country’s foreign currency short-term debt rating at a-2.
This is the third such upgrade by a sovereign credit rating agency this year, following S&P’s upgrade to ‘BBB’ (from BBB-) in August 2025 and Morningstar DBRS’ upgrade to ‘BBB’ (from BBB (low)) in May 2025.
R&I said India’s large economy, currently in its demographic dividend phase, is expected to sustain firm growth despite global uncertainties.
In FY2024, real GDP expanded 6.5%, supported by consumption, investment, and external demand. Growth remained strong in April–June 2025 at 7.8%. For FY2025, the Reserve Bank of India projects GDP growth at 6.5%.
“R&I believes that the economy will maintain the growth rate in the mid-6% range from FY2026 onwards, backed by the population growth, the catch-up effect of income, and the government’s public investment and economic policy among other factors,” the rating agency said in a statement.Government of India also welcomed the upgrade and said the move reaffirms India’s position as one of the most dynamic and resilient major economies in the world.”Three credit rating upgrades for India in five months reflect increasing global recognition for India’s robust and resilient macroeconomic fundamentals and prudent fiscal management, and underscore global confidence in India’s medium-term growth prospects amid prevailing global uncertainties,” the government said.
More from R&I on Indian economy
The rating agency noted that the government has reduced the fiscal deficit moderately, with the central government’s gap narrowing to 4.8% of GDP in FY2024 and a 4.4% target set for FY2025. Combined state and central debt fell to about 80% of GDP by March 2025, with most debt held domestically.
It also noted that India’s external stability has improved, with the current account deficit below 1% of GDP in FY2024, supported by surpluses in services and remittances. Adequate forex reserves and a low external debt ratio also reduced external risks.
R&I acknowledged potential risks, including the US raising tariffs on Indian exports to 50%, but assessed the impact as limited given India’s reliance on domestic demand.
It also factored in the upcoming two-tier Goods and Services Tax (GST) structure effective September 2025, which may lower revenues but stimulate consumption. ” In August 2025, the government announced the plan to simplify the GST to a two-tier structure, and will implement it in September. While the tax change will result in revenue losses due to tax rate reduction, the negative impact will likely be offset to some extent by the stimulation of private consumption. The possibility that the fiscal deficit will surpass the government plan considerably is limited, in R&I’s view.”
The agency said the Modi government’s push to attract foreign manufacturers, expand infrastructure, and improve the business environment is a move towards long-term growth. “While the government aims to make India a developed economy by 2047, it is necessary to accelerate the economic growth in order to achieve this goal. Eyes are on the government’s moves to see whether it will be able to upgrade the economic growth structure, while tackling the social issues such as poverty and unemployment simultaneously with pursuing fiscal consolidation,” R&I said.
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