Global credit rating agency Moody’s announced on Monday, September 29, 2025, that it has reaffirmed India’s long-term local and foreign-currency issuer ratings, alongside the local-currency senior unsecured rating, at ‘Baa3’ with a ‘Stable’ outlook. This decision is a testament to India’s robust economic growth and its strong external financial position.
Furthermore, Moody’s also upheld India’s short-term local-currency rating at P-3.
In a statement, Moody’s emphasized that this affirmation and stable outlook are based on their assessment of India’s enduring credit strengths. These include a large and rapidly expanding economy, a secure external financial standing, and a stable domestic funding base to manage its ongoing fiscal deficits.
These fundamental strengths are expected to help India withstand unfavorable global economic trends, especially given challenges such as high US tariffs (for nations rated Aa1 stable) and other international policies that could potentially impede India’s ability to attract foreign manufacturing investments.
Despite these positive indicators, Moody’s noted that India’s credit profile is tempered by persistent fiscal weaknesses, which are anticipated to continue.
While strong GDP growth and a phased approach to fiscal consolidation are expected, they will only result in a very slow reduction of the government’s substantial debt burden. The agency cautions that these measures might not significantly enhance debt affordability, particularly since recent fiscal policies aimed at boosting private consumption could diminish government revenues.
Moody’s further stated that India’s long-term local-currency (LC) bond ceiling remains at A2, and its long-term foreign-currency (FC) bond ceiling stands firm at A3.
Explaining the four-notch difference between the LC ceiling and the issuer rating, Moody’s pointed to modest external imbalances, characterized by ongoing (though narrow) current account deficits. Other contributing factors include a significant government presence in the economy and moderate levels of predictability and reliability in government policies.
The slight one-notch difference between the local currency and foreign currency ceilings, according to Moody’s, is due to India’s limited external debt and a low probability of a debt moratorium, particularly in light of recent moves to liberalize non-resident portfolio investment.
This announcement follows a significant upgrade by S&P Global Ratings on August 14, which elevated India’s sovereign rating by one notch from ‘BBB-‘ to ‘BBB’, also with a stable outlook. This marked S&P’s first upgrade for India in more than 18 years, signaling growing international confidence in the country’s economic trajectory.