Japan Rating Agency Upgrade India's Sovereign Ratings
JCRA said that the government policies aimed at boosting productivity and economic development have strengthened India’s economic foundations
New Delhi: Japanese credit rating agency (JCRA) on Wednesday has upgraded India’s sovereign rating to ‘A-’ from BBB+, citing ‘solid’ economic growth and improved financial parameters including robust private consumption, public investment and improvements in the country’s financial system.
In a statement on Wednesday, JCRA said that the government policies aimed at boosting productivity and economic development have strengthened India’s economic foundations. “The Indian economy has sustained a high growth rate of around 7 per cent. With a population of more than 140 crore and nominal GDP of $3.9 trillion, it is expected to retain a high growth rate of over 6 per cent in the current fiscal,” it said.
The agency focused mostly on productivity growth and economic development, including digital public infrastructure and the implementation of the goods and services tax (GST) in the country. “India has steadily implemented policies conducive to productivity growth and economic development, including the development of digital public infrastructure and the implementation of the GST, strengthening the country's economic foundations as compared to the past,” the agency said.
Besides, the agency also said that the financial foundation of the non-banking financial sector has also strengthened, contributing to a significant improvement in the soundness of the financial system in recent years. “The agency had a 'BBB+' rating in India. Now, the JCR’s 'A' rating implies a high level of certainty to honour the financial obligations, while ‘BBB+’ denotes an adequate level of certainty,” the statement said.
Last month, two global rating agencies, S&P and Fitch, had affirmed India's investment-grade rating, citing a dynamic and fast-growing, robust economy with policy stability and high infrastructure investment. The Indian economy grew at 7.8 per cent in the June quarter of FY '27, beating the 7 per cent GDP growth estimates by the RBI. The economy grew at 7.8 per cent in FY'26.
JCRA, in its rating, has considered that India faces structural challenges that tend to keep fiscal deficits at elevated levels; fiscal transfer arrangements aimed at reducing disparities among states; and fiscal management that is susceptible to electoral cycles.“In recent years, however, the government has restrained growth in current expenditures, including subsidies, while placing greater emphasis on capital expenditure, particularly infrastructure investment. The quality of fiscal expenditure has therefore improved,” the JCRA said.
In the Budget for 2024-25 (April-March), Union finance minister Nirmala Sitharaman had first announced that from FY '27 onwards, the government would endeavour to keep the fiscal deficit each year such that the central government debt will be on a declining path as a percentage of GDP.
Consequently, in the FY '27 Budget, the government estimated the debt-to-GDP ratio for the current fiscal at 55.6 percent of GDP, lower than 56.1 per cent of GDP for FY26. The government is looking to cut its debt-to-GDP ratio to 50 per cent by March 2031.
The government has also projected the fiscal deficit at 4.3 percent of GDP or Rs 16.96 lakh crore for FY'27. The fiscal deficit target for FY'27 will, however, be 4.5 per cent of GDP, based on the downward revision in India's nominal GDP in the new series with FY'23 as the base year.
