India's credit ratings upgrade is long overdue: RBI Guv Shaktikanta Das

Governor of the Reserve Bank of India Shaktikanta Das said that India is capable of meeting its external payment obligations and a credit ratings upgrade should happen soon

Shaktikanta Das, the Governor of the Reserve Bank of India (RBI), said that a credit rating upgrade for India was long overdue, given the country’s robust economic health. In an interview with CNBC-TV18 on Thursday evening, Das emphasised India’s strong macroeconomic fundamentals, substantial growth momentum, and high international investor confidence as key factors justifying a rating upgrade.

“An upgrade in credit rating should have occurred earlier. India’s macroeconomic fundamentals are solid, growth momentum is robust, and international investor confidence is high. Our considerable foreign exchange reserves also assure international investors. India is fully capable of meeting its external payment obligations. Therefore, I believe a rating upgrade is warranted and should happen soon,” Das told CNBC-TV18.

 

S&P Global Ratings improves outlook on India's credit rating

In May, S&P Global Ratings improved its outlook on India’s credit rating from ‘stable’ to ‘positive’, citing policy stability, ongoing economic reforms, and substantial infrastructure investment as factors sustaining long-term growth prospects. Despite affirming India’s lowest investment-grade sovereign credit rating (BBB-), this revision marked the first positive outlook change by S&P since September 2014.

Following the announcement, Union Finance Minister Nirmala Sitharaman, in a post on X (formerly Twitter), stated that S&P Global Ratings’ decision reflects India’s strong growth performance and optimistic economic outlook. “This achievement is the result of extensive macroeconomic reforms implemented since 2014, coupled with significant capital expenditure, fiscal discipline, and decisive leadership,” Sitharaman noted.

Currently, the other two major rating agencies, Fitch and Moody’s, maintain a ‘stable’ outlook for India, also assigning the country the lowest investment-grade sovereign rating. Das’s call for an upgrade highlights the growing confidence in India’s economic trajectory and its capacity to meet fiscal and external obligations amidst global economic uncertainties.

RBI Gov highlights ratings and deficit

While acknowledging the significant influence of credit ratings on investor decisions and borrowing costs, Das pointed out that many international investors now conduct their own analyses and make independent investment decisions, often anticipating the conclusions of rating agencies.
 

The RBI Governor also addressed concerns regarding India’s fiscal deficit. He emphasised the government’s commitment to fiscal consolidation, expressing confidence in the government’s direction towards achieving these targets, which he believes will further bolster the case for a credit rating upgrade.
 

The interim Budget in February has set the fiscal deficit at 5.1 per cent, to reduce it to 4.5 per cent by the financial year 2025-26. The Union Budget 2024 will be presented by Finance Minister Nirmala Sitharaman on July 23.