The Japan Credit Rating agency, or JCR, upgraded India’s sovereign credit rating from BBB(+) to A(-) last week, indicating a stable outlook for the Indian economy. This marks the first time in 35 years that a global rating agency has placed India in this category.
While a rating revision from other international agencies remains pending, JCR’s upgrade holds significant importance. An improved rating fosters a positive global investment climate for India and makes borrowing cheaper and more accessible for companies.
Although the Indian government and associated institutions attribute JCR’s rating upgrade to the strength of the Indian economy, it is also true that rating agencies have historically displayed a degree of bias against India.
The JCR upgrade highlights improvements in India’s economy, but the argument that global credit rating agencies have historically displayed a bias against India is well-founded.
Notably, India has long been the fastest-growing major economy in the world. India has never defaulted on interest or principal payments for its debt, and its foreign exchange reserves remain consistently high. Furthermore, India continues to make strides in the technology sector, setting new benchmarks in areas such as defence, telecommunications, space exploration, digital payments, and digital public infrastructure.
Recently, India once even surpassed Japan to become the world’s fourth-largest economy. The Indian banking sector is also moving forward after overcoming past challenges, with credit growth exceeding 20 per cent. In March 2026, the Gross Non-Performing Assets (GNPA) of Indian banks plummeted to a historic low of 1.73 per cent.
Yet, despite these achievements, global agencies like Moody’s, Standard & Poor’s, and Fitch have made only marginal improvements to India’s credit rating. Currently, India remains rated at Baa3 (stable) by Moody’s, BBB (stable) by Standard & Poor’s, and BBB- (stable) by Fitch. Despite pursuing so-called economic reforms driven by suggestions and pressure from Western nations, India did not see any significant improvement in its rating for a long time.
While Moody’s downgraded the outlook for Indian banks from stable to negative in 2020 due to the Covid-19 pandemic, causing turmoil in the stock markets, it is surprising that, despite having full information regarding the financial crises facing US banks, these agencies did not let the world know that their investments were in dire straits.
Interestingly, while these rating agencies downgraded financial institutions worldwide during the pandemic, they maintained high ratings for their own client companies. Standard & Poor’s admitted in 2015 to keeping client ratings high to secure business, implying that such ratings hold little real significance.
Despite the Indian economy’s stellar performance over the past few years—marked by more than Rs 52 lakh crore spent on infrastructure, the recovery of Indian banks from acute NPA crises, and GDP growth averaging more than 8 per cent, even amid global conflicts, international agencies remain unmoved and indifferent.
Perhaps this is why, in his Independence Day address this year, Prime Minister Narendra Modi called for India to develop its own rating agency to rival the world’s top agencies.
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People of Indian origin dismiss ratings
While global rating agencies have consistently and deliberately undervalued the Indian economy by ignoring its progress, people of Indian origin living abroad have rejected these ratings. Despite global agencies assigning the Indian economy a ‘BBB’ rating—placing it perilously close to ‘junk’ status—the country saw an unprecedented influx of foreign capital. Driven by a special Swap scheme, introduced by the Reserve Bank of India (RBI), people of Indian origin remitted more than $127 billion into Foreign Currency Non-Resident (FCNR) bank deposits in less between 8 June and 31 August.
Experts believe this occurred because the Indian diaspora expressed confidence in India’s central bank and commercial banks, trusting that their deposits were secure and that there was no risk regarding the repayment of principal and interest.
While it is true that the RBI’s decision to shield banks from currency devaluation risks—thereby enabling them to offer higher interest rates to depositors—was a key factor behind this unprecedented inflow of deposits, it also demonstrated that the biased ratings issued by global agencies failed to shake the diaspora’s confidence in India and its banking system.
By upgrading India’s rating from ‘BBB+’ to ‘A-’, JCR has signalled a positive shift in the Indian economy.
First, India’s consistently high GDP growth has impressed the agency. While GDP growth was recorded at 7.8 per cent in the first quarter of the current fiscal year, it has been around 7 per cent for several years—a rate significantly higher than that of other countries in the same rating category.
Second, massive and sustained investment in India’s infrastructure is laying the groundwork for future productivity and growth. In other words, Japan’s JCR is looking beyond India’s current growth to its future potential.
Third, structural reforms and initiatives—such as the GST tax overhaul, digital public infrastructure, a strengthened economic foundation, and complete transparency in government spending (particularly regarding Direct Benefit Transfers)—distinguish India from other nations and place it in a superior position.
Fourth, there have been unprecedented reforms in India’s banking sector—such as GNPA dropping below 2 per cent, the cleaning up of bank balance sheets driven by the Insolvency and Bankruptcy Code, and the RBI’s strict oversight of commercial banks. These are significant factors that other international rating agencies have overlooked. However, it’s now being accorded due importance by JCR.
The upgrade of India’s sovereign rating by the Japan Credit Rating Agency signals to the world that India’s economic fundamentals are now robust. An improved rating implies lower sovereign risk, enabling the government, banks, and Indian companies to access finance in international markets at a lower cost.
This facilitates not only portfolio investment but also long-term investments, potentially boosting foreign investor confidence in India. This enhances India’s international financial credibility and may pave the way for other rating agencies to upgrade India’s credit rating. Achieving further improvements in credit ratings would serve as a powerful catalyst for the Indian economy, driving down risk premiums and triggering a substantial influx of capital investment to fuel long-term, sustainable growth.
Ashwani Mahajan is National Co-Convener of Swadeshi Jagran Manch and a former professor at PGDAV College, University of Delhi. He tweets @ashwani_mahajan. Views are personal.
(Edited by Saptak Datta)