Japanese Credit Rating Agency Upgraded India’s Sovereign Credit Rating. How Does It Affect the Ordinary Indian?

Recently, Japan’s credit rating agency (JCR) upgraded India’s sovereign credit rating by one notch, from BBB+ to A-, with a stable outlook.

JCR also upgraded India’s foreign-currency and long-term issuer ratings from BBB+ to A-, while raising the country ceiling from A- to A.

The upgrade reflects India’s sustained and resilient economic growth, which stood at 7.8%, supported by robust private consumption and public investment. JCR also highlighted policies aimed at improving productivity, including Digital Public Infrastructure (DPI) and the Goods and Services Tax (GST).

The agency also pointed to the strengthening of India’s financial sector. India’s banking-sector non-performing loan (NPL) ratio has fallen below 2%, aided by the Insolvency and Bankruptcy Code (IBC), stronger RBI supervision, and macroprudential measures.

Financial inclusion has also expanded through digital payments and Direct Benefit Transfers (DBT), improving access to financial services and increasing the visibility of economic activity in the informal sector.

However, JCR also identified structural concerns at the federal level, including complex Centre-State fiscal relations, fiscal-transfer arrangements, and fiscal management that can remain vulnerable to electoral cycles.

How Does India’s Rating Compare With Other Agencies?

In contrast to JCR, other major credit rating agencies, such as Moody’s and Fitch, continue to rate India at Baa3 and BBB-, respectively. These are the lowest investment-grade ratings.

Both agencies have highlighted concerns including India’s relatively high public debt compared with countries at similar income levels. They have also pointed to challenges such as employment generation and India’s relatively low per-capita income, which needs to improve further.

About JCR?

The Japan Credit Rating Agency (JCR) was established in 1985 and is a leading Japanese financial services company providing credit ratings and economic research.

Its core responsibilities include assessing the creditworthiness of corporate debt, financial institutions, local governments, and sovereign issuers.

A sovereign credit rating assesses a country’s ability and willingness to meet its debt obligations.

JCR’s market coverage extends to more than 70% of Japan’s financial sector and over 60% of publicly rated corporate issuers.

Why Does the Rating Matter to Indian economy? 

A sovereign credit rating influences the cost at which a country can borrow in international markets.

A higher credit rating generally indicates stronger creditworthiness and a lower perceived risk of default. This can help a country access international capital markets at relatively lower borrowing costs. Conversely, a lower rating signals higher perceived risk, which can increase borrowing costs.

Therefore, if India’s credit rating continues to improve and other major rating agencies follow JCR’s assessment, India could gain cheaper and easier access to international capital from markets such as the US and Japan.

This could make more capital available for investment, infrastructure, businesses, and economic development.

Ultimately, the impact on ordinary Indians would not necessarily be immediate or direct. But over time, a stronger sovereign credit profile can contribute to lower financing costs, greater investment, stronger economic activity, and potentially more employment opportunities.