SBI Research Says S&P’s Positive Growth Forecast for India Comes as No Surprise

India's credit rating hadn't captured the country's economic fundamentals for almost a decade, and S&P's recent rating move proves that India's rating was supposed to be higher all this while, says an SBI Research report.

The report says S&P's real GDP growth forecast of 6.5% is quite realistic in contrast to other projections.

The rating agency further pointed out that US tariffs are bound to have a marginal effect and are not likely to hurt India's long-term growth track. Sectoral exemption on medicines and consumer electronics implies that exports vulnerable to tariffs constitute only 1.2% of GDP.

S&P forecasts India's current account deficit to be between 1.0% and 1.4% for the period 2025-2028, while consumer price inflation is forecasted to be in the range of 4-4.5% until 2028, SBI Research quoted from the S&P report.

The agency pointed to better quality of government expenditure in the last five to six years, with increased budgetary allocation to capital expenditure, which has risen to 3.1% of GDP. It also conceded that inflation expectations in India are currently better anchored than they were a decade ago.

S&P estimated that India's general government debt as a share of GDP would fall to 78% in fiscal year 2029 from 83% in fiscal year 2025.

In its August 2025 report, S&P Global Ratings upgraded India's long-term sovereign credit rating from BBB– to BBB with a stable outlook. The agency also upgraded India's transfer and convertibility assessment to A–, showing decreased risk of capital or exchange controls that could pose a barrier to currency conversion or transfers of funds overseas.

Earlier, in May 2024, S&P had upgraded India's rating outlook from stable to positive on the basis of strong growth and better quality of government spending.

The recent rating upgrade is based on three main pillars: credible fiscal consolidation, a robust external position, and well-anchored inflation expectations. But the potential risks to the downside are associated with a lack of political commitment to ongoing fiscal consolidation. SBI Research opined that sustained reforms and a further debt reduction could set the stage for future upgrades.