New Delhi, Aug 14 (PTI) The sovereign rating upgrade by S&P on Thursday is a significant affirmation of India's economic trajectory and prudent fiscal management, the finance ministry said.

This marks the country's first sovereign upgrade by S&P in 18 years, the previous one being in 2007 when India was elevated to investment grade at BBB-, the finance ministry said in a statement.

In May 2024, the agency revised its outlook on India from 'Stable' to 'Positive', it said.

Earlier in the day, the global rating agency S&P upgraded India's sovereign credit rating to 'BBB' with a stable outlook, citing robust economic growth, political commitment for fiscal consolidation and 'conducive' monetary policy to check inflation.

As per S&P's India sovereign rating review published today, the upgrade reflects a combination of key factors, including India's buoyant and dynamic economic growth, the government's sustained commitment to fiscal consolidation, improved quality of public spending, particularly on capex and infrastructure, and strong corporate, financial, and external balance sheets.

Credible inflation management and increasing policy predictability have also played a central role, the ministry said.

S&P in its report details the key strengths of the Indian economy, which have enabled India to stand out as one of the fastest-growing major economies globally, with real GDP growth averaging 8.8 per cent from FY22 to FY24, the highest in the Asia-Pacific region.

Monetary policy reforms, particularly the adoption of an inflation-targeting regime, have anchored inflation expectations more effectively, the ministry said citing the rating agency.

S&P has also recognised that despite global headwinds and price shocks, India has demonstrated resilience by maintaining overall price stability.

Monetary improvements, combined with the ongoing development of deep domestic capital markets, have created a more stable and supportive environment for the overall economic scenario.

The report further observes that India's external and financial positions remain strong and the democratic institutions continue to ensure policy continuity and long-term economic stability.

Looking ahead, it said, S&P projects GDP growth of 6.5 per cent in FY26 and a continued momentum over the next three years.

The agency suggested that a narrowing fiscal deficit and continued public investment could support further positive rating actions.

The report also noted that the impact of recently imposed US tariffs is expected to be limited, owing to India's large and resilient domestic consumption base, the ministry said. PTI DP HVA

Sovereign credit rating upgrade signals strengthened macroeconomic resilience and policy credibility, tied to fiscal consolidation and inflation control. Sovereign credit rating upgrade reflects assessment of macroeconomic resilience and policy credibility, citing sustained economic growth, fiscal consolidation, improved quality of public spending focused on capital expenditure and infrastructure, stronger corporate, financial and external balance sheets, and effective inflation management under an inflation targeting framework. The agency links further positive rating prospects to a narrowing fiscal deficit and continued public investment, notes benefits from deeper domestic capital markets and democratic policy continuity, and observes limited impact from recent external tariffs owing to resilient domestic consumption.