NEW DELHI: Lashing out at the global credit agencies, the Economic Survey for 2020-21 has charged them with prejudice against emerging economies such as India.
The Survey, which was tabled in Parliament on Friday, highlighted how rating agencies have rated India much below expectation on several parameters including GDP growth, general government debt and inflation over a period of two decades, which does not truly reflect India’s fundamentals.
Global ratings agencies S&P, Moody’s and Fitch have placed the lowest investment grade rating on India, which is just above junk.
“Never in the history of sovereign credit ratings has the fifth largest economy in the world been rated as the lowest rung of the investment-grade (BBB-/Baa3). While sovereign credit ratings do not reflect the Indian economy’s fundamentals, noisy, opaque and biased credit ratings damage FPI flows,” the Survey said, calling for an overhaul of rating methodology to reflect economies’ ability and willingness to pay their external obligations.
The Survey went on to add that India’s ability to pay can be gauged not only by extremely low foreign currency-denominated debt of the sovereign but also by the comfortable size of its foreign exchange reserves that can pay for the short-term debt of the private sector as well as the entire stock of external debt, including that of the private sector.
In June, Fitch Ratings revised India outlook stating the pandemic has weakened the country’s growth prospects and exposed challenges associated with a public-debt burden.
Moody’s had downgraded India’s sovereign rating to ‘Baa3’ from ‘Baa2’, saying there will be challenges in the implementation of policies to mitigate risks of a sustained period of low growth and deteriorating fiscal position. S&P Global Ratings retained the ‘BBB-’ rating for India for the 13th year in a row in June last year.
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