Thumbs Up for Economy

A sovereign rating upgrade alone isn't enough but it can be a great enabler

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It took 18 years to correct itself, but S&P's vote of confidence in the Indian economy should still bring confidence and cheer, especially because of the rating agency's belief that the US's punitive tariffs can be managed. In fact, S&P is of the view that the fiscal cost of India substituting Russian oil imports would be modest. The agency had upgraded India's outlook to positive in May last year. In that sense, Friday's decision to upgrade India's sovereign rating to BBB from BBB-, accompanied by a stable outlook, essentially reinforces the prevailing perception that India's economy is in good shape in a volatile world.

There's no doubt that the economy is doing well on virtually every front, having recovered nicely from the pandemic without giving up on fiscal discipline. Indeed, the compression of the combined fiscal deficit—from 9.45% in FY22 to 7.48% in FY26—has been most impressive. It is to the government's credit that the finances have been so well-managed.