S&P Global Ratings on Thursday retained India's sovereign rating at 'BBB' with a stable outlook, saying India is a dynamic and fast-growing economy with policy stability and high infrastructure investment.
In August last year, the US-based rating agency upgraded India's long-term sovereign credit rating after a gap of 18 years to 'BBB', from 'BBB-'.
Public investment and consumer momentum will underpin "solid" growth prospects for India in the next 2-3 years, S&P said, adding that it expects policy continuity, which would support further economic reforms and fiscal consolidation.
It also said that although there is a coalition government at the Centre, the BJP retaining a healthy majority in the Lok Sabha supports the government's efforts to implement economic reforms.
"The sovereign credit ratings on India are anchored by a dynamic and fast-growing economy, strong external balance sheet, and stable institutions that support policy predictability," S&P said while affirming its 'BBB' long-term and 'A-2' short-term unsolicited sovereign credit ratings on India.
The outlook on the long-term rating is stable.
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The 'BBB' is the investment-grade rating, meaning the country has adequate capacity to meet its financial commitments, but is more sensitive to adverse economic conditions compared to higher-rated sovereigns.
S&P said high energy prices and challenging agricultural conditions will marginally slow India's growth this year, but economic fundamentals are expected to remain sound and support robust growth over the next two to three years.
Counter-balancing India's strengths are the government's weak fiscal performance and burdensome debt stock, as well as low GDP per capita, the US-based agency said.
The stable outlook reflects S&P's view that continued policy stability and high infrastructure investment will support India's long-term growth prospects.
"The success of the government in funding large infrastructure investment without substantially widening the country's current account deficit will be important. If India can shrink the fiscal deficit significantly while achieving these objectives, rating support will strengthen over time," it said.
The growth outlook, along with stable fiscal and monetary policies that moderate the government's elevated debt and interest burden, will underpin the rating over the next 24 months, it added.
India remains among the best-performing economies in the world, S&P said while projecting GDP growth to fall to 6.6 per cent this fiscal on account of an ongoing energy shock and challenging agricultural conditions.
Indian economy grew at 7.7 per cent in FY26.
More effective capex programmes, including greater participation by the private sector, will help to alleviate a widespread shortfall in physical infrastructure and, over time, enhance the productive capacity of the economy, S&P said.
"India faces a shortfall in the provision of basic services, particularly in rural areas. Improved physical infrastructure is a prerequisite for higher private investment and competitiveness," S&P said.
The government has made a concerted effort to address the shortfall by increasing capex, in parallel with lowering the share of the budget spent on subsidies, while also pursuing fiscal consolidation, it added.
"We expect India's strong growth dynamics to continue in the medium term with GDP growth averaging 7 per cent annually over the next three years. This has a moderating effect on the ratio of government debt to GDP despite wide fiscal deficits," S&P added.
India's average annual growth in the last 5 years till fiscal 2026 was 7.9 per cent.
Although the country faces near-term inflationary pressures from elevated energy and food prices, S&P said it expects inflation to stay within the Reserve Bank of India's (RBI) target range.
Earlier this month, another rating agency, Fitch, had affirmed India's rating at 'BBB-', citing a robust domestic economy.
(This story has not been edited by NDTV staff and is auto-generated from a syndicated feed.)
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