Japan's R&I upgrades India's currency rating to BBB+; outlook stable

R&I upgrade comes as RBI rate cuts, GST revamp and resilient domestic demand boost confidence in India's economic outlook

Japan’s Rating and Investment Information (R&I) has upgraded India’s foreign currency rating to BBB+ on Friday, citing steady growth, improving fiscal discipline, and stable external finances. The agency has updated the rating outlook to “stable”.

 

R&I highlighted that India’s economy is resilient to global risks, including higher US tariffs, as it relies mainly on domestic demand, while praising the policies of the Narendra Modi-led National Democratic Alliance (NDA) government.

 

“Despite the uncertainties surrounding the global economic environment, India’s economy can be expected to maintain firm growth thanks to the economic structures driven by domestic demand and the policies of the administration of Prime Minister Shri Narendra Modi,” the rating agency said in a statement.

 

The government has welcomed the move by the rating agency and underlined that this is the third agency to improve India’s ratings in this fiscal year after S&P and Morningstar DBRS.

 

“The Government of India remains committed to building on this momentum through policies that promote inclusive, high-quality growth alongside fiscal prudence and macroeconomic stability,” it said in a statement.

 

State of Indian economy

 

The economy grew 6.5 per cent in FY24 and expanded 7.8 per cent in the April-June 2025 quarter. The Reserve Bank of India (RBI) expects growth of around 6.5 per cent this year, supported by strong domestic demand, business investment, and government spending.

 

India’s fiscal deficit narrowed to 4.8 per cent of gross domestic product (GDP) in FY24 and is targeted at 4.4 per cent in FY25, helped by higher tax revenues and lower subsidies. The current account deficit, the gap between imports and exports, remains modest at under 1 per cent of GDP, while foreign exchange reserves are strong.

 

GST rate change

 

The government has overhauled the Goods and Services Tax (GST), reducing two key slabs of 12 per cent and 28 per cent. Most goods and services now fall under lower tax rates. The government has also asked businesses to pass on these benefits to customers, a move expected to boost consumer demand. 

Although the new rates will come into effect from September 22, several companies have already begun offering discounts to reflect the tax cuts.

 

Earlier this week, Union Finance Minister Nirmala Sitharaman said the GST changes would save consumers around ₹2 trillion, calling the reform a “big step for the Indian economy.”

 

RBI rate cut

 

RBI has reduced the repo rate by 100 basis points since February, before hitting pause in the August review. The rate cut, amid low inflation figures in this fiscal year, indicated that the central bank is keen on boosting demand.