India’s sovereign credit rating could be upgraded if the fiscal deficit narrows “meaningfully” to bring the country’s overall general government deficit to under 7% of GDP, a top official at S&P Global Ratings said on Tuesday.

S&P Global had raised its rating outlook for the country to ‘positive’ earlier this year, based on a view that continued policy stability, deepening economic reforms, and high infrastructure investments would sustain the economy’s growth prospects.

“We see a lot of promise in India’s economic growth story, even amid a somewhat challenging global economic growth outlook,” said Andrew Wood, director, sovereigns and international public finance for Asia-Pacific at the rating major. “Looking ahead, we could raise the ratings if India’s fiscal deficits narrow meaningfully, such that the net general government deficit falls below 7% of GDP on a structural basis,” he added.

Terming the central government’s lower fiscal deficit target of 4.9% of GDP for 2024-25 as “good news at the margin”, Mr. Wood noted that the general government deficit, which includes State governments’ deficits, is likely to remain above 7% of GDP “at least” for the current year. “The trajectory for this metric over the next few years will remain an important one for the directionality of India’s ratings,” he underlined.