Japan Credit Rating Agency Ltd (JCR) on Wednesday upgraded India’s sovereign credit rating by a notch to A- from BBB+, citing the economy’s sustained high growth, the effectiveness of its economic policies, stronger financial system and improving quality of government expenditure.
JCR had maintained the BBB+ rating for India since 2007, including during the global financial crisis, the pandemic, and subsequent geopolitical disruptions.
The agency also raised India’s country ceiling by one notch to A, reflecting its assessment that India’s economic fundamentals, policy framework, fiscal trajectory and financial-sector resilience have strengthened sufficiently to warrant a higher sovereign credit standing.
It assigned a stable outlook to both India’s foreign-currency and local-currency long-term issuer ratings.
Fastest-growing major economy
The upgrade comes as India continues to retain its position as the fastest-growing major economy, expanding at a high pace despite a turbulent global environment marked by geopolitical conflicts, elevated energy prices and concerns over a weaker-than-normal monsoon.
JCR said India’s economy has maintained growth of around 7%, supported by robust private consumption and public investment. It said the economy grew by 7.7% in 2025-26, and it is expected to maintain high growth of over 6% in FY27.
Already, signs of stronger growth are evident in the first-quarter gross domestic product (GDP) numbers announced by the ministry of statistics and programme implementation (MoSPI), which put the country’s growth at 7.8%, higher than that of any other economy globally.
The ratings agency said the resilience of growth was particularly significant given the external environment. It noted that inflation had risen since the beginning of 2026 due to higher food prices driven by unfavourable weather and higher energy prices amid escalating. Still, inflation has remained within the Reserve Bank of India’s target range.
It said successive policy measures had strengthened India’s economic foundations, highlighting the development of digital public infrastructure and implementation of the goods and services tax () as measures that have improved productivity and supported economic development.
The agency also pointed to a marked strengthening of India’s financial system. The gross non-performing loan ratio in the banking sector declined to 1.8% at the end of March 2026, while capital adequacy and profitability remained sound. It attributed the improvement partly to the Insolvency and Bankruptcy Code, government capital support for public-sector banks and stronger supervision by RBI.
The non-banking financial sector has also become more resilient, while digital payments and direct transfers of government benefits have expanded financial inclusion and improved the visibility of informal economic activity, JCR said.
Fiscal consolidation
Fiscal consolidation was another key factor behind the upgrade. The central government’s fiscal deficit declined to 4.4% of in FY26 from 4.7% in the previous year, even as capital expenditure remained high. JCR said the government’s shift towards infrastructure and other productive capital spending, while restraining current expenditure, including subsidies, had improved the quality of fiscal expenditure.
The central government debt stood at 56.1% of GDP at the end of FY26 and is expected to decline gradually, JCR said.
However, it flagged elevated general government debt, including borrowings by state governments, and the associated interest burden as continuing weaknesses. It said it would monitor whether government capital expenditure succeeds in crowding in private investment and reducing the economy’s dependence on government spending while sustaining growth.
India’s external position also supported the upgrade. Despite a persistent trade deficit driven by strong domestic demand, the current account deficit remains contained due to a services surplus. Foreign exchange reserves are ample and significantly exceed short-term external debt, providing resilience against external shocks, JCR said.