What prompted India’s return to the ‘A’ rating after 35 years?
The Japan Credit Rating Agency has upgraded India's sovereign credit rating to 'A-' for the first time in 35 years. This upgrade reflects improved confidence in India's ability to repay debt, which may lower future borrowing costs for the government.
Why it matters
A higher credit rating can reduce interest expenses on national debt, potentially freeing up taxpayer funds for other public investments.
The story so far : The Japan Credit Rating Agency (JCRA) earlier this month upgraded India’s sovereign credit rating to ‘A-’ from the previous ‘BBB+’. This is the first time in more than 35 years that India has received an ‘A’ rating. This development has direct implications for the cost of India’s future borrowing, and thereby how taxpayer money is utilised.
A credit rating is not a rating of a country, per se. They are a rating of a country’s ability and willingness to repay its debt. In other words, they capture the risk of lending and the likelihood of repayment. It is somewhat like the credit score that individuals receive at the hands of credit bureaus such as Cibil.
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