New Delhi, Aug. 18 -- It has taken 18 years for India to climb a single step on a global credit ladder. Last week, S&P Global Ratings upgraded India's sovereign rating to BBB (stable) from BBB-, the bottom-most rung of "investment grade", where the country had been languishing since 2007. On the surface, a one-notch move may look modest, but in terms of sovereign ratings, it carries weight.

Credit ratings are essentially a report card for a nation's ability and willingness to repay debt. They influence the borrowing costs for governments, the risk perception of investors, and the finance options of companies abroad.

Ratings are broadly classified into "investment grade" and "speculative" (non-investment) grades. The former signals a low...