Why Japan has upgraded India's sovereign credit rating to 'A-'
What's the story
The Japan Credit Rating Agency (JCR) has upgraded India's sovereign credit rating by one notch to 'A-' from 'BBB+.' The upgrade comes on the back of India's strong economic growth, improving fiscal quality, and a strengthening financial system. The agency has also revised India's country ceiling upward by one notch to 'A.'
Economic stability
Strong economic growth backed by robust private consumption
The JCR noted that India's economy has been growing at a high rate of around 7%, backed by strong private consumption and public investment.
The agency highlighted the government's consistent efforts in implementing policies that promote productivity growth and economic development, like digital public infrastructure development and GST implementation.
These initiatives have strengthened India's economic foundations over time.
Banking progress
Improvement in banking sector
The JCR also pointed out the improvement in India's banking sector, with the non-performing loan ratio dropping to below 2%.
This is largely due to the Insolvency and Bankruptcy Code (IBC) and enhanced financial supervision by the Reserve Bank of India (RBI).
The agency noted that these measures have significantly improved the soundness of India's financial system in recent years.
Fiscal responsibility
Acknowledgment of India's fiscal management improvements
The JCR also acknowledged improvements in India's fiscal management.
Despite structurally high fiscal deficits due to complex Centre-state fiscal relations and spending pressures linked to electoral cycles, the agency noted a shift toward capital expenditure and infrastructure investment.
It said, "In FY2026, the central government reduced its fiscal deficit from 4.7% of GDP in the previous fiscal year to 4.4% while maintaining capital expenditure at a high level."
Digital impact
Digital public infrastructure and financial inclusion
The JCR also highlighted the role of digital public infrastructure in expanding access to financial services.
It said, "The development of digital public infrastructure has expanded access to financial services for a broad range of people and businesses, including low-income households and microenterprises."
The agency also noted that the widespread adoption of digital payments and direct transfer of government benefits have promoted financial inclusion in India.