R&I Japan upgrades India's credit rating to BBB+ with stable outlook

R&I Japan upgraded India's sovereign credit rating to BBB+ from BBB with a stable outlook, citing demographic dividend, resilient domestic demand and fiscal policy progress

The Japanese credit rating agency, Rating and Investment Information (R&I), on Friday upgraded India’s sovereign credit rating by a notch to BBB+ from ‘BBB’ with a stable outlook backed by the country’s demographic dividend, robust domestic demand, and sound government policies.

 

“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,” R&I said in a press statement.

 

This is India’s third rating 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.

 

Noting that India remains among the world’s best performing economies, S&P Global ratings had said: “The upgrade of India reflects its buoyant economic growth, against the backdrop of an enhanced monetary policy environment that anchors inflationary expectations.”

 

The Japanese rating agency said that while the increase in US tariffs on India to 50 per cent may pose a risk factor for the economic outlook, India’s economy was mainly driven by domestic factors, and its dependence on exports to the US was not high. R&I report took note of the recent rate rationalisation of the Goods and Service Tax (GST) moving the tax slabs to two main rates from four. 

 

“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 R&I report said.

 

R&I in its report has projected the Indian economy to maintain GDP growth rate in the mid-6 per cent range from FY26 onwards, backed by the population growth, the catch-up effect of income, and the government’s public investment and economic policy among other factors.

 

R&I said that the government had made progress in reducing the fiscal deficit at a moderate pace, and the government debt ratio is likely to fall.

 

“While the government has been increasing capital expenditures, it has managed to reduce the fiscal deficit, thanks to the tax revenue increase backed by the strong domestic demand as well as the cut of subsidies,” R&I said.

 

The government has set a target of achieving a fiscal deficit at 4.4 per cent of GDP in FY26.

 

The rating agency highlighted that India needs to accelerate economic growth in order to achieve the goal of becoming a developed economy by 2047.

 

“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,” the rating agency said.