The global sovereign credit rating agency, Morningstar DBRS, upgraded India’s Long-Term Foreign and Local Currency – Issuer Ratings from BBB (low) to BBB with a Stable trend. This upgrade reflects India’s strong economic performance and is a key current affairs topic for competitive exams like UPSC, SSC, and Banking.
Short-Term Rating Improvement
Enhanced Financial Stability
India’s Short-Term Foreign and Local Currency Issuer Ratings were also upgraded from R-2 (middle) to R-2 (high) with a Stable trend. This indicates improved financial stability and confidence in India’s ability to manage short-term financial obligations.
Reasons for the Upgrade
Key Economic Drivers
The upgrade was driven by several factors:
- Structural reforms like infrastructure investments and digitalisation, leading to fiscal consolidation (lower debt and deficit).
- High GDP growth averaging 8.2% during FY22-25.
- Macroeconomic stability with stable inflation, exchange rate, and strong external balance.
- A resilient banking system with well-capitalised banks, high capital adequacy ratio, and a 13-year low in non-performing loans.
These achievements highlight India’s economic progress and policy effectiveness.
Potential for Further Upgrades
Future Growth Prospects
Morningstar DBRS noted that India’s credit rating could see further upgrades if reforms continue to boost investment rates and medium-term growth. Despite current public debt levels, risks are low due to local currency denomination and long maturity structures. Reducing the public debt-to-GDP ratio could lead to additional rating improvements.
Understanding the Rating Scale
Comparison with Other Agencies
The Morningstar DBRS rating scale is similar to those of Fitch and S&P. However, Morningstar DBRS uses ‘high’ and ‘low’ suffixes, unlike the +/- used by Fitch and S&P. For example, BBB is a strong rating, indicating economic reliability.
Why This Matters
Boosting India’s Global Image
The credit rating upgrade enhances India’s global economic standing, making it more attractive for foreign investments. It reflects the success of government policies and economic reforms, which are key focus areas for competitive exam syllabi.
Relevance for Competitive Exams
Study Resource for Aspirants
The credit rating upgrade by Morningstar DBRS is a vital current affairs topic for competitive exams. Topics like economic reforms, GDP growth, and banking stability are frequently tested in exams like IAS, IBPS, and RRB. Stay updated with GKboard.in for concise, exam-focused current affairs content.