"Japan Credit Rating Agency Upgrades India's Sovereign Rating to A-Minus"
Sovereign credit rating
An independent assessment of a government's ability and willingness to repay debt, expressed as a letter grade.
Investment grade
Ratings of BBB-/Baa3 and above; below this threshold (BB+ and below) is classified as non-investment grade or 'junk'.
Sovereign credit ratings are independent assessments of a government's ability and willingness to repay its debt obligations. Rating agencies assign letter grades ranging from AAA (highest creditworthiness) down through investment-grade territory (BBB-/Baa3 and above) to sub-investment or 'junk' status (BB+ and below). These grades are not merely symbolic. Under Basel III regulations, they are embedded in the capital rules that banks worldwide must follow. A higher sovereign rating lowers the 'risk weight' that banks must assign to a country's government bonds, reducing the capital banks must hold against those bonds. This makes sovereign debt cheaper to issue and easier to place with institutional investors.
In India, credit rating agencies operating domestically are regulated by SEBI under the SEBI (Credit Rating Agencies) Regulations, 1999, not by the Reserve Bank of India, a distinction that UPSC has directly tested. Prominent Indian agencies include ICRA (a public limited company and Moody's affiliate), CRISIL (an S&P affiliate), CARE Ratings, and Brickwork Ratings. Globally, the dominant agencies are S&P Global, Moody's, Fitch, the Japan Credit Rating Agency (JCRA), R&I of Japan, and Morningstar DBRS. The industry itself dates to 1909, when John Moody began grading American railroad bonds; sovereign ratings followed in the 1920s.
India last held an A-grade sovereign rating in January 1988, when Moody's assigned it an A2. The borrowing-fuelled growth of the 1980s pushed the central government's fiscal deficit to 9.1% of GDP and the current account deficit to 3.1% of GDP by FY 1989-90. Political instability, the First Gulf War, and rising oil prices compounded the stress. By October 1990, India was downgraded to Baa1, and by mid-1991, foreign exchange reserves covered only a few weeks of imports. India was further downgraded to non-investment grade. The 1991 balance-of-payments crisis that followed forced the landmark LPG reforms, liberalisation, privatisation, and globalisation, establishing the durable lesson that structural crisis can unlock structural reform. Despite credible macroeconomic progress through successive governments over the following three decades, the A-grade remained out of reach.
Sovereign ratings influence the cost and availability of external financing for a government. When a country is upgraded, institutional investors, pension funds, insurance companies, sovereign wealth funds, face lower regulatory barriers to holding that country's debt. Demand for sovereign bonds rises, yields fall, and the government can borrow more cheaply. The effect cascades: domestic banks holding government securities see their capital requirements ease, freeing up lending capacity. Corporates in that country also benefit indirectly, since the sovereign rating typically acts as a ceiling on private-sector ratings.
The JCRA upgrade on 2 September moved India's long-term sovereign rating from BBB+ to A-, and raised the country ceiling to A. The agency cited three structural factors: a high growth rate of around 7%, supported by robust private consumption and public investment; personal income-tax cuts and GST rate reductions supporting consumption; and the banking sector's gross non-performing loan ratio declining to 1.8%, supported by the Insolvency and Bankruptcy Code (IBC) and government capital injections. …
Consider the following statements:
1.In India, credit rating agencies are regulated by Reserve Bank of India.
2.The rating agency popularly known as ICRA is a public limited company.
3.Brickwork Ratings is an Indian credit rating agency.
Which of the statements given above are correct?
With reference to the Indian economy, consider the following statements:
1.A share of the household financial savings goes towards government borrowings.
2.Dated securities issued at market-related rates in auctions form a large component of internal debt.
Which of the above statements is/are correct?
Do you agree with the view that steady GDP growth and low inflation have left the Indian economy in good shape? Give reasons in support of your arguments.
Consider the following statements regarding credit rating agencies in India:
1.Credit rating agencies operating in India are regulated by the Reserve Bank of India.
2.ICRA is a public limited company.
3.Brickwork Ratings is an Indian credit rating agency.
4.Sovereign ratings below BB+ are classified as investment grade.
How many of the above statements are correct?
Match the following credit rating agencies with their correct descriptions:
List I (Agency) — List II (Description)
A.ICRA — 1. Indian credit rating agency; public limited company
B.Brickwork Ratings — 2. Indian credit rating agency; not a public limited company
C.S&P Global — 3. Global agency; currently rates India at BBB
D.Fitch — 4. Global agency; currently rates India at BBB-
Select the correct answer:
With reference to sovereign credit ratings and Basel III regulations, consider the following statements:
1.A sovereign credit upgrade lowers the 'risk weights' that banks must hold against government bonds.
2.Lower risk weights on sovereign bonds increase the cost of sovereign borrowing.
3.The sovereign rating of a country typically acts as a ceiling on private-sector credit ratings from that country.
Which of the statements given above is/are correct?
Consider the following statements about India's sovereign credit rating history:
1.India last held an A-grade sovereign rating in January 1988.
2.India was downgraded to non-investment grade following the First Gulf War and the 1991 balance-of-payments crisis.
3.The Japan Credit Rating Agency's 2026 upgrade to A- is a solicited rating, requested by the Government of India.
Which of the statements given above is/are correct?
With reference to India's GDP measurement methodology, consider the following statements:
1.The revised GDP series introduces the Output Producer Price Index in place of the Wholesale Price Index for deflation.
2.'Double deflation' refers to deflating both output and intermediate inputs separately to measure real value added.
3.India's revised GDP series aligns with the System of National Accounts (SNA) 2008 framework.
Which of the statements given above is/are correct?
Want the full note, Prelims Facts & MCQ answers?
Create a free account — takes less than a minute.
Create free account