The global sovereign credit rating agency Morningstar DBRS has raised India’s Long-Term Foreign and Local Currency Issuer Ratings from BBB (low) to BBB, maintaining a Stable outlook. Additionally, India’s Short-Term Foreign and Local Currency Issuer Ratings have been elevated from R-2 (middle) to R-2 (high), also with a Stable outlook.

The upgrade is primarily driven by India’s ongoing structural reforms, including investments in infrastructure and digitalisation, which have supported fiscal improvement, such as reducing debt and deficits. These efforts have also helped maintain strong economic growth, with an average GDP growth of 8.2% from FY22- 25, along with macroeconomic stability, such as controlled inflation, stable exchange rates, and a balanced external economy. Additionally, a robust banking system with well-capitalised banks, a high capital adequacy ratio and the lowest level of non-performing loans in 13 years played a key role in the upgrade. 

India’s credit rating could be further improved if the country continues to push reforms that boost investment and strengthen long-term growth prospects. The report also noted that while current public debt levels are high, the risks to debt sustainability are minimal because the debt is denominated in local currency and has long-term maturity. Ongoing reforms and a reduction in the debt-to-GDP ratio could lead to even higher ratings in the future. 

The rating system used by Morningstar DBRS is comparable to those of Fitch and S&P, with the main difference being that Morningstar DBRS adds 'high' and 'low' as suffixes, while Fitch and S&P use a '+' or '-' symbol.