S&P Global Ratings on Thursday affirmed India's sovereign rating at 'BBB-' with a stable outlook and said sound the country's economic fundamentals will underpin growth over the next 2-3 years.

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The stable outlook reflects S&P's view that India's sound economic fundamentals will be sufficient to offset the government's weak fiscal performance, helping to sustain elevated government funding needs and a high-interest burden over the next 24 months.

However, S&P said it may lower the ratings if India's economic growth slows materially, on a sustained basis — so that its negatively affects fiscal sustainability — or if net general government debt, general government debt to GDP, or the government's interest burden materially exceed its forecasts, signifying a weakening of the country's institutional capacity to maintain sustainable public finances.

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"We may raise the ratings if India's fiscal metrics dramatically improve, on a sustained basis. We may also raise the ratings if we observe a sustained and substantial improvement in the central bank's monetary policy effectiveness and credibility, such that inflation is managed at a durably lower rate over time," the agency said in a statement.

"S&P Global Ratings affirmed its 'BBB-' long-term and 'A-3' short-term unsolicited foreign and local currency sovereign credit ratings on India. The outlook on the long-term rating is stable," S&P said. 'BBB-' is the lowest investment grade rating.

"India's economy is performing well amid challenging global conditions. We anticipate sound fundamentals to underpin growth over the next two to three years," S&P said.

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The government will likely maintain elevated fiscal deficits and a large debt stock despite ongoing consolidation efforts, it added. Earlier this month, another global rating agency Fitch had affirmed India's sovereign rating at 'BBB-' with a stable outlook, citing robust growth and resilient external finances.