In the realm of global finance, credit ratings play a crucial role in shaping the perception of a country’s economic stability and investment potential. India, as a burgeoning economic powerhouse, has been striving for a credit Rating upgrade to enhance its standing in the international market. With aspirations to attract more foreign investment and improve its borrowing costs, the Indian government has been engaged in discussions with credit rating agencies, particularly Moody’s, in an attempt to understand the rating methodologies and address concerns. However, the elusive rating upgrade continues to be a topic of debate and analysis. India’s pursuit of a credit rating upgrade has gained attention in recent years, as the country seeks to bolster its economic prospects. Credit ratings are critical as they impact borrowing costs, investor sentiment, and the overall perception of a nation’s economic health. A higher credit rating signifies lower risks for lenders, prompting reduced interest rates on loans. Additionally, an improved rating can instil confidence in foreign investors, encouraging them to channel funds into the country. These benefits have spurred India’s desire to secure a higher sovereign credit rating. However, India’s credit rating has remained stagnant at the lowest investment-grade level for over a decade. This has raised questions about the methodologies employed by rating agencies, which some critics argue might be biased against emerging economies like India. The Indian government, along with market participants and analysts, has sought to understand and address these concerns to pave the way for an upgrade.

The primary credit rating agencies, including Moody’s, Standard & Poor’s (S&P), and Fitch, evaluate countries based on various factors such as fiscal discipline, economic growth, political stability, and institutional effectiveness. While India has made significant progress in several aspects, challenges persist. High public debt, limited fiscal manoeuvrability, and structural issues hindered by bureaucracy and complex regulations have impeded India’s progress towards a rating upgrade. One of the key points of contention revolves around the rating agencies’ assessment of India’s fiscal deficit. India has consistently targeted lower fiscal deficits, showcasing its commitment to fiscal discipline. Nevertheless, rating agencies remain cautious, highlighting the need for sustained improvement in India’s fiscal position. Moreover, the agencies have expressed concerns over the country’s high public debt and its impact on fiscal sustainability, further contributing to the rating conundrum. Another factor affecting India’s credit rating is its economic growth trajectory. Despite being one of the fastest-growing economies globally, India has faced challenges in maintaining consistent and robust growth rates. Sluggish economic growth in recent years, coupled with the disruptions caused by the COVID-19 pandemic, has given rating agencies reason to exercise caution in upgrading India’s rating. They emphasize the importance of sustainable and inclusive growth to alleviate concerns surrounding the country’s economic stability. Additionally, rating agencies take into account factors like political stability, institutional effectiveness, and ease of doing business. India’s vast and diverse political landscape, coupled with bureaucratic hurdles, has often been perceived as impediments to swift decision-making and implementation of reforms. These concerns have been reflected in the evaluation of India’s creditworthiness. In response to the challenges, the Indian government has engaged in dialogues with rating agencies, notably Moody’s, seeking to comprehend their methodologies better. The government has sought clarifications and presented its case, demonstrating the measures taken to address key concerns. The aim is to bridge the gap between the current rating and the desired upgrade, with the government endeavouring to exhibit the progress made on fiscal discipline, economic reforms, and growth potential. Despite the hurdles, India’s pursuit of a sovereign credit rating upgrade remains steadfast. The government has implemented significant reforms such as the Goods and Services Tax (GST), bankruptcy code, and various initiatives to enhance the ease of doing business. Moreover, structural reforms in sectors like agriculture and labour are underway to boost productivity and promote sustainable growth. These efforts, along with continued engagement with rating agencies, may eventually pave the way for a higher rating.