A Long-Awaited Ratings Upgrade Signals A New India

When global ratings agency S&P Global lifted India's long-term sovereign credit rating from BBB- to BBB on August 14, 2025, the news was met with quiet confidence in New Delhi. For some, this may have looked like a minor technical adjustment in the alphabet soup of international finance. But for India, it was a moment 18 years in the making. The last time the nation saw an upgrade of this magnitude was in 2007.

Much has changed since then: the world has endured financial crises, geopolitical realignments, a pandemic, and energy shocks. Through it all, India has grown into a fundamentally different economic entity - one that is more resilient, more ambitious, and increasingly indispensable to the global order.

The timing of this upgrade could not have been more symbolic. On the eve of Independence Day, the world effectively endorsed India's economic trajectory. S&P's rationale was clear: strong economic growth, credible monetary policy, and a demonstrated commitment to fiscal consolidation. This is not merely about bookkeeping. It is an affirmation that India has graduated from being viewed as another emerging market to a stable and reliable economy with a long-term growth story.

The numbers tell the tale. According to the IMF, India's GDP is projected to touch $4.6 trillion by 2028, making it the world's third-largest economy in nominal terms. Even more striking is the recent EY report that states the Indian economy is projected to reach $20.7 trillion by 2030 and potentially $34.2 trillion by 2038. In other words, within little more than a decade, India is set to leapfrog into the very top tier of the global economic order.

But numbers alone do not explain the optimism. What has impressed international fiscal entities is India's ability to grow at a rapid clip while maintaining macroeconomic stability. Inflation, once a perennial concern, has been reined in with effective monetary interventions by the Reserve Bank of India. Fiscal deficits, though still a challenge, are moving along a path of consolidation, with the government signalling discipline while also investing in infrastructure and social spending. For ratings agencies, credibility matters as much as capacity, and India has demonstrated both.

Sovereign upgrades matter because they lower the cost of borrowing for governments and, by extension, for companies. A higher rating often leads to greater capital inflows, deeper bond markets, and increased confidence from foreign institutional investors. In practical terms, it means India can raise funds for nation-building at more favourable terms, further fuelling the cycle of growth.

Equally significant is the shift in perception. Today, international institutions see India not only as a vast consumer market but also as a driver of global growth. According to the IMF, India will contribute more than 15% to global GDP growth over the next five years; second only to China. This puts the country in a rare position: as a bridge between the developed and developing worlds, between the Global South and the advanced economies that now seek diversification of supply chains and investment destinations.

Of course, challenges remain. Structural reforms in labour, land, and capital markets still need acceleration. India's per capita income, while rising, remains modest compared to developed economies. And geopolitical risks, whether from energy markets, regional conflicts, or climate change, cannot be discounted.

Yet, what sets the present apart is the confidence with which India is confronting these challenges.

Eighteen years is a long time to wait for a sovereign upgrade. But perhaps that wait reflects the maturation of India's economy. The S&P upgrade, modest in appearance, is in reality a vote of confidence in this deeper transformation.

The author is a writer at Milaybami.

MENAFN02092025000049011007ID1110007953