New Delhi, Sep 10 India’s recent rating upgrade to “BBB” by S&P acknowledges its macroeconomic strength, but the rating still falls short of capturing the country’s true credit profile, a report said on Wednesday.
"As compared to BBB and even A-rated peers, India’s growth trajectory, fiscal consolidation, external resilience, banking stability, and institutional credibility present a much stronger macro profile," MP Financial Advisory Services said in its report.
According to the findings, these pillars suggest that India’s creditworthiness is already more consistent with stronger-rated sovereigns, raising the debate on whether the current BBB level reflects the country’s true credit standing.
“When assessed across growth, debt sustainability, external resilience, banking stability, and institutional credibility, India’s fundamentals not only compare favourably but, in several respects, outperform higher-rated economies," said Mahendra Patil, Founder and Managing Partner, MP Financial Advisory Services LLP.
The current BBB rating, therefore, materially understates India’s true credit strength, which already aligns more closely with higher-rated peers across multiple dimensions, he added.
Over the past decade, India has consistently delivered 6–7 per cent real GDP growth, a level unmatched by most BBB-rated and even several A-rated peers, whose long-run average growth typically falls between 2-3 per cent.
The nation's economic resilience has been tested through multiple global shocks — the 2008 Global Financial Crisis, the 2013 taper tantrum, the COVID-19 pandemic, and repeated commodity price surges — during which advanced peers often slipped into stagnation while India maintained positive momentum.
India’s debt-to-GDP ratio, at 81–82 per cent, is elevated but stable, with the IMF projecting a gradual decline to 78 per cent by FY2029.
This compares favourably with many higher-rated sovereigns: Italy (135 per cent), France (110 per cent), Belgium (104 per cent), and Japan (235 per cent). Even Germany (63 per cent ) and Canada (69 per cent), though lower on headline debt, face much weaker growth trajectories, making their debt ratios more persistent.
The report noted that India’s nominal GDP growth of 10–11 per cent significantly outpaces its effective interest cost of 6–7 per cent, creating a favourable “growth–interest rate” differential.
This positive gap enables India to gradually ‘grow out of debt,’ as robust growth drives down debt ratios over time. In contrast, advanced economies such as Italy, France, and Japan face the opposite challenge with sluggish growth, according to the report.
"India is increasingly channelling fiscal resources into capital expenditure. The capex has risen from 12 per cent of the Union budget in FY2019 to 23 per cent in FY2025," the report said.
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