After 35 years, India's sovereign rating upgraded to 'A-' by JCR on solid growth, resilient financial system

New Delhi: Banking on "solid" economic growth and a strong financial system, Japanese credit rating agency JCR on Wednesday upgraded India's sovereign rating to 'A-', a feat achieved after a gap of 35 years.

JCR's 'A' rating implies a high level of certainty to honour its financial obligations.

The rating upgrade by Japan Credit Rating Agency (JCR) from 'BBB+' to 'A-' comes within days of India's NSO publishing higher-than-expected GDP data, which showed the economy grew 7.8 percent in the first quarter on strong performance by the manufacturing and services sector, despite global headwinds from the West Asia crisis.

Follow The PSUWatch Channel on WhatsApp

"Considering India's solid economic growth, the effectiveness of economic policies that strengthen the foundations for growth, and the improved soundness of the financial system, JCR has upgraded the Republic of India's Foreign Currency and Local Currency Long-term Issuer Ratings by one notch to 'A-'," it said.

The Finance Ministry said the rating upgrade by JCR "reflects India's strong and resilient economic growth, improving fiscal quality, strengthened financial system and robust external position".

Chairman of the 15th Finance Commission NK Singh, in a post on X, said the rating upgrade is a recognition of India's growth momentum, macro stability, deep structural reforms, and the strength of Centre-State partnership.

"The 'A' is back after 35+ years," Singh said, adding that India was last assigned an 'A2' rating by Moody's in 1988. The rating was downgraded at the time of the Balance of Payments (BoP) crisis in 1990-91.

Last year, India received sovereign rating upgrades from major international rating agencies.

Morningstar DBRS upgraded India's rating in May 2025, followed by S&P Global Ratings in August 2025 and Japan's Rating and Investment Information, Inc. (R&I), in September 2025.

JCR also recognised the improvement in the quality of fiscal expenditure, with greater emphasis on capital expenditure, particularly infrastructure investment.

It noted that the central government's fiscal deficit declined from 4.7 percent in FY25 to 4.4 percent in FY26, while capital expenditure remained high.

The Finance Ministry said the upgrade comes against the backdrop of a challenging global environment and underscores the continued strengthening of India's economic fundamentals, supported by sustained growth, effective economic policies, improved fiscal quality and a stronger financial system.

JCR said the Indian economy has maintained a high growth rate of around 7 percent, supported by robust private consumption and public investment.

The 7.8 percent growth clocked in Q1 beats RBI's 7 percent GDP growth estimates.

The agency also said that India, with a population of more than 140 crore and nominal GDP of USD 3.9 trillion, is expected to retain a high growth rate of over 6 percent in the current fiscal.

The Indian economy grew at 7.8% in FY26.

JCR said India has steadily implemented policies conducive to productivity growth and economic development, including the development of digital public infrastructure and the implementation of the goods and services tax (GST), strengthening the country's economic foundations as compared to the past.

The agency also cited the overall soundness of India's financial system with the strengthening of the asset quality of the banking sector, supported by the establishment of the Insolvency and Bankruptcy Code, capital infusion by the government and strengthened supervision by the RBI.

Last month, two global rating agencies, S&P and Fitch, affirmed India's investment-grade rating, citing a dynamic and fast-growing, robust economy with policy stability and high infrastructure investment.

The Japanese agency, 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.

Follow PSU Watch on LinkedIN

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, JCR said.

In the Budget for 2024-25 (April-March), Finance Minister Nirmala Sitharaman had first announced that from FY27 onwards, the government will 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 FY27 Budget, the government estimated the debt-to-GDP ratio for the current fiscal year at 55.6 percent of GDP, lower than 56.1 percent of GDP for FY26. The government is looking to cut its debt-to-GDP ratio to 50 percent by March 2031.

The government has projected the fiscal deficit at 4.3 percent of GDP or Rs 16.96 lakh crore for FY27.

The fiscal deficit target for FY27 will, however, be 4.5 percent of GDP, based on the downward revision in India's nominal GDP in the new series with FY23 as the base year.

The Centre has set a gross borrowing target of Rs 16.09 lakh crore for FY27, and a net borrowing of Rs 11.73 lakh crore after repaying past loans and borrowing through treasury bills.

JCR said the central government debt-to-GDP ratio stood at 56.1 percent at the end of FY26 and is expected to decline gradually. However, the general government debt, including that of state governments, and the associated interest burdens remain high.

It said India's current account deficit (CAD) "stays contained", supported by a surplus in the services balance. Its foreign exchange reserves are ample and significantly exceed its short-term external debt, providing the country with strong resilience to external shocks.

India's current account deficit widened to USD 4.2 billion, or 0.5 percent of GDP, in the June quarter of the current fiscal year, from USD 3.4 billion a year ago. Foreign exchange reserves hit a record high of USD 729.33 billion in the week ended August 21.

(PSU Watch is India's Business News centre that places the spotlight on PSUs, Bureaucracy, Defence and Public Policy. 👉 Click to join our channel now: PSUWatch WhatsApp Channel. Prefer LinkedIn? Follow PSU Watch on LinkedIN. Click to stay connected on Twitter here and stay updated)