R&I Japan Upgrades India's Sovereign Rating to BBB+: Reflects Robust Economic Fundamentals and GST Reforms

Rating and Investment Information, Inc. (R&I) Japan has elevated India's long-term foreign-currency sovereign issuer rating from BBB to BBB+, maintaining a 'Stable' outlook and affirming the short-term rating at 'a-2'. This upgrade positions India as a lower-medium investment-grade sovereign, underscoring strengthened macroeconomic fundamentals and fiscal improvements. India's GDP grew by 6.5% in FY2024 and 7.8% year-on-year in Q1 FY2025, with projections stabilizing around 6% from FY2026. The central government's fiscal deficit narrowed to 4.8% of GDP in FY2024, with plans targeting further reduction in FY2025 through enhanced tax collections and subsidy rationalization. Combined central and state debt stands at approximately 80% of GDP, deemed manageable due to domestic investor holdings and nominal GDP growth. The current account deficit was slightly under 1% of GDP in FY2024, supported by services surpluses, remittance inflows, low external debt ratios, and adequate foreign-exchange reserves. R&I also considered the recent GST rationalization, transitioning to a two-tier structure, and anticipates that potential revenue losses will be mitigated by stronger private consumption. This policy mix of demand-supporting investments, revenue mobilization, and targeted reforms has enhanced India's creditworthiness while maintaining policy flexibility for growth.