JCR upgrades India’s sovereign rating to ‘A-’, cites strong growth and improving financial system

The Japan Credit Rating Agency (JCR) has upgraded India’s long-term foreign currency and local currency issuer ratings to ‘A-’ from ‘BBB+’, citing the country’s strong economic growth, improving financial-sector soundness, and policies aimed at strengthening the foundations of growth.

JCR has assigned a stable outlook to both ratings and raised India’s country ceiling by one notch to ‘A’.

The rating agency said the Indian economy has maintained a high growth rate of around 7%, supported by robust private consumption and public investment. It also stated the government’s policies aimed at boosting productivity and economic development, including the development of digital public infrastructure and implementation of the goods and services tax (GST). According to JCR, these measures have strengthened India’s economic foundations compared with the past.

Following the latest action, India’s long-term foreign currency issuer rating is ‘A-’, upgraded from ‘BBB+’, with a stable outlook. Its long-term local currency issuer rating has also been upgraded to ‘A-’ from ‘BBB+’, with a stable outlook.

Why has JCR upgraded India’s rating?

JCR said the upgrade reflects India’s solid economic growth, the effectiveness of economic policies aimed at strengthening the foundations for growth, and the improved soundness of the financial system.

The agency said that the banking sector’s non-performing loan ratio has fallen below 2%, supported by the Insolvency and Bankruptcy Code (IBC), stronger financial supervision by the Reserve Bank of India (RBI) and enhanced macroprudential policies.

The financial position of the non-banking financial sector has also strengthened, contributing to a major improvement in the overall soundness of India’s financial system in recent years.

How fast is India’s economy growing?

India, which has a population of more than 1.4 billion and nominal GDP of around $3.9 trillion, recorded real GDP growth of 7.7% in FY26.

Private consumption remained robust during the year, supported by personal income tax cuts and reductions in GST rates. The rating agency expects India to maintain a growth rate of more than 6% in FY27.

Inflation has been rising since the beginning of 2026, driven by higher food prices following unfavourable weather conditions and higher energy prices amid escalating tensions in the Middle East. However, JCR said inflation has remained within the RBI’s target range.

JCR said India continues to face structural challenges that tend to keep fiscal deficits elevated. These include complex fiscal relations between the Centre and states, fiscal transfers aimed at reducing disparities among states and fiscal management that can be affected by electoral cycles.

At the same time, the government has in recent years restrained the growth of current expenditure, including subsidies, while giving greater emphasis to capital expenditure, particularly infrastructure investment.

JCR said this shift has improved the quality of fiscal expenditure and could help raise India’s potential growth rate.

The central government reduced its fiscal deficit to 4.4% of GDP in FY26, from 4.7% in the previous fiscal year, while maintaining capital expenditure at a high level. The central government’s debt-to-GDP ratio stood at 56.1% at the end of FY26 and is expected to decline gradually. However, JCR said general government debt, including that of state governments, and the associated interest burden remain high. The agency said it will continue to assess whether government capital expenditure can generate greater private investment and reduce the economy’s dependence on government spending while sustaining economic growth.

How has India’s banking sector strengthened?

JCR said the asset quality of public-sector banks, which had previously been a key vulnerability in the financial system, has improved substantially. The improvement has been supported by the IBC, government capital injections and stronger supervision by the RBI.

The banking sector’s gross non-performing loan ratio fell to 1.8% at the end of March 2026, while capital adequacy and profitability remained sound. Asset quality and capital adequacy have also improved in the non-banking financial sector, further strengthening the overall financial system, JCR said.

JCR said the development of digital public infrastructure has expanded access to financial services for a broad range of individuals and businesses, including low-income households and microenterprises.

The widespread adoption of digital payments and direct transfers of government benefits into bank accounts have supported financial inclusion and improved the visibility of informal economic activity, the agency said.

India continues to run a trade deficit, reflecting strong domestic demand. However, JCR said the country’s current account deficit remains contained, supported by a surplus in services. India also has ample foreign exchange reserves, which exceed its short-term external debt. This provides the country with resilience against external shocks, according to JCR.