Ratings agency Standard & Poor’s announced on Friday, September 26th that it was upgrading its outlook on India’s sovereign rating to stable from negative, noting increasing confidence that the country’s new government will be able to make significant structural reforms in Asia’s third-largest economy.

S&P noted that it believes the new Indian government apparently has both the willingness and capacity to undertake the painful reforms required to recoup some of India’s growth potential and get the nation’s economy back on the right track.

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With today’s move, Standard & Poor’s joins Moody’s and Fitch which both have stable outlooks on India’s credit rating. Of note, all three rating agencies give Indian debt the lowest investment-grade rating.

S&P dropped India’s rating outlook to negative back in April 2012 when the country’s economy was struggling with stubborn inflation and a negative balance sheet.

Statement from S&P

“Our outlook revision reflects our view that India’s improved political setting offers a conducive environment for reforms, which could boost growth prospects and improve fiscal management,” S&P’s statement noted, while reaffirming its BBB- rating on India’s long-term debt.

India credit rating outlook upgraded on anticipated economic growth

The improved ratings outlook from Standard  & Poor’s is a clear endorsement of the business-friendly government of Prime Minister Narendra Modi that won elections earlier this year on the promise of rebooting India’s reform process and improving frustratingly slow economic growth.

Analysts point out that the optimism created by the new government and the reform-oriented policy changes it has discussed and introduced during the last few months have already boosted expectations that the nation’s economy is on the road to recovery and could book as much as 6% this fiscal year. In fiscal year 2014, India’s economy grew at just under 5% for the second year in a row, and political analysts noted that public dissatisfaction at the lack of economic progress was a major issue in the elections this spring.