Japan’s JCR upgrades India’s sovereign rating to ‘A-’ with stable outlook

NEW DELHI: Japan Credit Rating Agency (JCR) has upgraded India’s Long-Term Foreign Currency and Local Currency Issuer Ratings by one notch from ‘BBB+’ to ‘A-’, while maintaining a Stable Outlook.

JCR has also raised India’s country ceiling by one notch to ‘A’, in a move that reflects the agency’s assessment of the strengthening foundations of the Indian economy.

The Government of India welcomed the upgrade, which JCR attributed to India’s solid economic growth, the effectiveness of economic policies, improving fiscal quality, a stronger financial system and a robust external position.

The rating agency noted that the Indian economy has maintained a high growth rate, supported by private consumption and public investment. According to the latest GDP estimates released by the Ministry of Statistics and Programme Implementation (MoSPI), real GDP growth remained at 7.8% in FY26.

The growth momentum continued into the first quarter of FY27, with real GDP also growing by 7.8%, despite prevailing global headwinds.

JCR also highlighted the government’s continued implementation of policies aimed at supporting productivity and economic development. It specifically cited the development of digital public infrastructure and implementation of the Goods and Services Tax (GST) as measures that have strengthened the foundations of the economy.

Fiscal quality and infrastructure spending

JCR has also recognised an improvement in the quality of India’s fiscal expenditure, with greater emphasis being placed on capital expenditure, particularly infrastructure investment.

The agency noted that the Central Government’s fiscal deficit declined from 4.7% of GDP in FY25 to 4.4% in FY26, while capital expenditure remained high.

The combination of sustained infrastructure investment and fiscal consolidation was cited as an important factor supporting the improvement in India’s credit profile.

Banking system strengthens

The rating upgrade also reflects the agency’s assessment of a significant improvement in the overall soundness of India’s financial system.

JCR noted that the asset quality of the banking sector has strengthened, supported by measures including the Insolvency and Bankruptcy Code, government capital infusion and strengthened supervision by the Reserve Bank of India.

Capital adequacy and profitability in the banking sector have remained sound, according to the agency.

The financial position of the non-banking financial sector has also improved, with better asset quality and capital adequacy contributing to the overall strengthening of the financial system.

External position provides resilience

India’s external position was another factor supporting the rating upgrade.

JCR said the current account deficit remains contained, supported by a surplus in the services balance. The country’s foreign exchange reserves, which significantly exceed short-term external debt, provide a substantial buffer against external shocks.

The agency’s assessment comes at a time of continued uncertainty in the global economy. It said India’s economic fundamentals have continued to strengthen through sustained growth, effective economic policies, improved fiscal quality and a more resilient financial system.

The latest upgrade adds to a series of sovereign rating improvements received by India from international rating agencies over the past year.

Morningstar DBRS upgraded India’s sovereign 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.

The JCR upgrade to ‘A-’, with a Stable Outlook, places further emphasis on the improving assessment of India’s economic resilience and institutional and financial fundamentals.