Japan rating agency upgrades India's sovereign rating amid strong economic growth

Japan Credit Rating Agency (JCR) has upgraded India's sovereign rating to 'A-' with a stable outlook, citing solid economic growth and improved financial parameters. The agency previously rated India at 'BBB+'.JCR said India, with a population of more than 140 crore and nominal GDP of $3.9 trillion, is expected to retain a growth rate of over 6 per cent in the current fiscal. The Indian economy has maintained a high growth rate of around 7 per cent, supported by robust private consumption and public investment.JCR's 'A' rating implies a high level of certainty of honouring financial obligations, whilst 'BBB+' denotes an adequate level of certainty. Last month, S&P and Fitch had affirmed India's investment-grade rating, citing a dynamic, fast-growing economy with policy stability and high infrastructure investment.The government has implemented policies which have been conducive to productivity growth and economic development, including digital public infrastructure and the goods and services tax (GST), strengthening the economy's foundations.The financial foundation of the non-banking financial sector has also strengthened, contributing to improved soundness of the financial system.Notably, India's economy grew 7.8 per cent in the June quarter of FY'27, beating the RBI's 7 per cent estimate.JCR noted structural challenges, including elevated fiscal deficits, fiscal transfer arrangements to reduce disparities among states, and fiscal management susceptible to electoral cycles. However, the government has restrained current expenditure growth whilst emphasising capital expenditure, improving the quality of fiscal spending.The government aims to keep central debt on a declining path relative to GDP, targeting 50 per cent by March 2031, from an estimated 55.6 per cent in FY'27, down from 56.1 per cent in FY'26. The fiscal deficit is projected at 4.3-4.5 per cent of GDP for FY'27.JCR said India's current account deficit remains contained, supported by a services surplus, while foreign exchange reserves, at a record $729.33 billion as of 21 August, provide strong resilience against external shocks.Get the latest Business News and Live updates. Download the TOI app.