A credit rating is a letter grade for financial trustworthiness. Just as students get A, B, C grades, borrowers (governments and corporations) get AAA, AA, BBB, etc. The higher the rating, the lower the perceived default risk, and the cheaper the borrowing cost. A downgrade from BBB to BB ("fallen angel") can be catastrophic.
Investment grade: AAA to BBB- (S&P) or Aaa to Baa3 (Moody's). Speculative grade (junk): BB+ and below. Many institutional investors — pension funds, insurance companies — are legally prohibited from holding junk-rated bonds. A downgrade to junk triggers forced selling by these institutions, crashing the bond price.
India's sovereign rating: BBB- (the lowest investment grade) from S&P and Fitch. Despite being the world's fastest-growing major economy, India's rating has not been upgraded since 2007. A one-notch upgrade would lower borrowing costs for the entire country. Domestically, CRISIL, ICRA, CARE, and India Ratings rate Indian corporates and bonds.