As of September 29, 2025, Moody's has affirmed India's sovereign rating at Baa3 with a stable outlook. This is the lowest investment-grade rating offered by Moody's, indicating moderate credit risk. 
Key takeaways from the Moody's report

• Affirmation based on credit strengths: Moody's states that the rating reflects India's sustained credit strengths, which include a large and rapidly growing economy, a strong external position, and a stable domestic financing base for fiscal deficits.
• Fiscal weaknesses remain: The rating is balanced by longstanding fiscal challenges. Moody's noted that strong economic growth would only lead to a gradual decline in the government's high debt burden and that recent revenue-eroding measures could hinder fiscal consolidation.
• Resilience against external shocks: The rating agency noted that India's strengths lend it resilience against adverse external trends, such as global trade restrictions and potential US tariffs.
• Growth projection: Moody's projected India's economic growth to remain strong, with GDP growth of 6.5% for the fiscal year 2025–26, maintaining its position as the fastest-growing G20 economy.
• Outlook implications: A "stable" outlook suggests that Moody's does not anticipate a change to India's sovereign rating in the near future. An upgrade would depend on a material improvement in India's fiscal position and debt affordability. 

About Moody's rating agency
Moody's is an American business and financial services company that provides credit ratings, research, and analytical tools. It is considered one of the "Big Three" credit rating agencies, along with Standard & Poor's and Fitch Group. 
Key information

• Company structure: Moody's Corporation is the parent company with two main divisions:
  • Moody's Ratings: Formerly Moody's Investors Service, this division provides credit ratings for various debt securities issued by companies, governments, and other entities.
  • Moody's Analytics: This division offers data, insights, software, and tools for economic analysis and risk management.

• Credit ratings: Moody's ratings use a standardized scale to measure the creditworthiness of borrowers and the debt they issue. The scale ranges from Aaa (highest quality, lowest risk) to C (lowest quality, typically in default).
• Purpose of ratings: The purpose of Moody's ratings is to give investors a system for gauging the relative creditworthiness of securities. The ratings are forward-looking opinions on the likelihood that a debt issuer will repay its obligations.
• Headquarters: Moody's headquarters is located in New York City, with offices worldwide. 

History

• Founding: The company traces its history back to John Moody, who began publishing investment manuals in 1900.
• Pioneering ratings: In 1909, John Moody introduced the first widely accessible system for rating railroad bonds with letter grades.
• Independence: Following a decades-long acquisition by Dun & Bradstreet in 1962, Moody's Investors Service was spun off as an independent, publicly traded company in 2000.
• Subprime crisis: During the 2008 financial crisis, Moody's and other rating agencies faced criticism for having assigned high ratings to mortgage-backed securities that later defaulted.

Context of the Baa3 rating

• Lowest investment grade: Baa3 is the lowest rating in the investment-grade category. A rating lower than this would be considered "junk" status, which would make it more expensive for India to borrow money internationally.
• Comparison with other agencies: While Moody's affirmed its Baa3 rating, other agencies have recently made different assessments:
• S&P Global: In August 2025, S&P upgraded India's sovereign rating by one notch to "BBB" (stable outlook), its first upgrade for India in over 18 years.
• Morningstar DBRS and R&I: Also upgraded India's rating to "BBB" and "BBB+" respectively in 2025. 

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