Morningstar DBRS upgrades India's rating to BBB with stable outlook

Morningstar DBRS upgrades India's issuer rating to BBB, citing strong reforms and growth potential while expecting limited impact from regional geopolitical tensions

Global sovereign credit rating agency Morningstar DBRS on Friday upgraded India’s long-term foreign and local currency – issuer ratings from BBB-low to BBB with a stable trend.

 

Morningstar DBRS said it expected the tensions between India and Pakistan to remain contained within the region.

 

It did not anticipate a meaningful impact on India’s medium-term growth prospects or creditworthiness.

 

It, however, said that the border skirmishes along Jammu & Kashmir and Arunachal Pradesh with Pakistan and China have contributed to India’s low — 21st percentile — rank for political stability and absence of violence and terrorism indicators.

 

“India’s BBB credit rating balances India’s public finance challenges with the economy’s high-growth potential,” the report by Morningstar DBRS said.

 

 

The upgrade has been driven by “the cumulative and ongoing benefits of India’s structural reform efforts” which the ratings agency said were facilitating fiscal consolidation and helping sustain India’s high-potential growth rate.

 

On the uncertainty surrounding the imposition of US tariffs, the ratings agency said India looked comparatively well-positioned, given the low level of goods it exported to the US and the domestic-driven nature of the Indian economy. 

 

The agency said while the near-term outlook is clouded by external risks — including tariff uncertainty and geo-political tensions — India’s favourable demographics, high savings, and potential catch-up in technological capabilities suggest that the country’s medium-term growth prospects remain strong.

 

On Thursday, S&P Global ratings warned that escalation of the India-Pakistan conflict would come with heightened regional credit risks. It said that while no immediate rating actions had been taken, the situation introduces material uncertainty that could weigh on sovereign credit profiles if tensions persist.

 

Meanwhile, Moody’s on Tuesday had said India's economy is likely to grow slower at 6.3 per cent in 2025 from 6.7 per cent in the previous year, owing to tensions with Pakistan.

 

The International Monetary Fund (IMF), in its April 2025 World Economic Outlook, projected India to remain one of the world’s fastest growing economies through the end of the decade.

 

The Morningstar DBRS report also said despite the current public debt levels, risks to debt sustainability are relatively low due to local currency denomination and long maturity structures.