The Standard & Poor (S&P) on Wednesday announced a revision in the outlook for the Indian economy from ‘stable’ to ‘positive’, while affirming the overall rating at ‘BBB-’. The agency said the transfer and convertibility assessment remains ‘BBB+’.

The positive outlook reflects expectations of sustained policy stability, deepening economic reforms, and high infrastructure investment, which are anticipated to support long-term growth prospects.

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“Coupled with cautious fiscal and monetary policies, these factors could diminish the government’s elevated debt and interest burden, bolstering economic resilience and potentially leading to a higher rating within the next 24 months,” S&P said.

Further, as the country is witnessing the largest democratic elections, which will go for its seventh and last phase of voting on June 1 and declare the results on June 4, S&P highlighted, “Regardless of the election outcome, we expect broad continuity in economic reforms and fiscal policies.”

Last year in May, S&P Global Ratings upheld India’s sovereign rating at ‘BBB-’ for the long term and ‘A-3’ for the short term, maintaining a stable outlook.

At that time, the rating agency highlighted sound economic fundamentals expected to support growth over the following two to three years, despite concerns over weak fiscal performance and low gross domestic product (GDP) per capita.

On a further upside scenario for India, S&P said that it may raise the ratings if the country’s fiscal deficits narrow meaningfully such that the net change in general government debt falls below 7% of GDP on a structural basis.

“The protracted rise in public investment in infrastructure will lift economic growth dynamism that, combined with fiscal adjustments, could alleviate India’s weak public finances.”

“We expect sound economic fundamentals to underpin the growth momentum over the next two to three years,” S&P said in a statement.

“We may raise the ratings if India’s fiscal deficits narrow meaningfully such that the net change in general government debt falls below 7% of GDP on a structural basis,” it said.

It added that sustained public investment in infrastructure, combined with fiscal adjustments, could improve India’s weak public finances. Additionally, a notable improvement in the central bank’s monetary policy effectiveness and credibility, resulting in lower inflation rates, could also prompt a ratings upgrade.

Additionally, the agency expressed expectations of continued economic reforms and fiscal policies, regardless of the outcome of upcoming elections.

S&P also warned that India’s outlook may be revised to ‘stable’ if there was a decline in political commitment to maintaining sustainable public finances, indicating a weakening of the country’s institutional capacity.