IFA Global Weekly Outlook #1

17 August, 2025

Global Developments: Rating Upgrade & GST Rationalization to Lift Sentiment

India witnessed two key developments this week that could significantly boost investor sentiment and market confidence.

Firstly, S&P Global Ratings upgraded India’s sovereign rating to BBB with a Stable outlook from BBB- with Positive outlook, marking the first return to the BBB category in 35 years. The agency highlighted India’s strong domestic consumption, robust public capex, and resilience to global headwinds as key strengths. It added that a credible roadmap for fiscal consolidation could open doors for further upgrades, underlining confidence in India’s long-term growth trajectory.

On the policy front, Prime Minister Narendra Modi, in his Independence Day speech, announced GST rationalization. Items currently taxed at 28% are proposed to be brought down to 18%, while goods taxed at 12% may be reduced to 5%. If cleared by the GST Council, these changes could be implemented around Diwali, providing a direct boost to consumer demand and business sentiment.

Meanwhile, on the geopolitical front, there is cautious optimism that the U.S. may reconsider the proposed 25% penalty on Indian crude imports from Russia after the Trump-Putin meeting in Alaska. Reports suggest discussions originally scheduled for late August may be postponed, potentially easing external pressure on India’s energy sector.

Global Market Snapshot
Major equity markets ended the week on a mixed note. Japan’s Nikkei surged 5.7%, while Jakarta gained 4.8%. The U.S. S&P500 and Europe’s FTSE and CAC posted modest gains of 0.9%, 1.9%, and 2.3% respectively. On the other hand, Kospi (-0.1%) and Straits (-0.2%) closed slightly lower, reflecting selective investor caution.