CEA slams ratings agencies for refusing to upgrade India
12 May 2017
India's chief economic advisor Arvind Subramanian on Thursday contrived a pun to criticise ratings agencies that refuse to upgrade India, saying they have "Poor Standards".
The play on the name of ratings agency Standard & Poor's did impress some of the media, as Subramanian slammed the agencies for not upgrading India "despite clear improvements in economic fundamentals".
"In other words, the ratings agencies have been inconsistent in their treatment of India and China. Given this record - what we call 'poor standards' - my question is: why do we take these rating analysts seriously at all?" he told PTI news agency.
Earlier this month, US-based agency Fitch kept India's sovereign rating at 'BBB-' a rating India was assigned more than a decade ago, a PTI report pointed out earlier this month.
"In recent years, rating agencies have maintained India's BBB- rating, notwithstanding clear improvements in our economic fundamentals such as inflation, growth, and current account performance. At the same time, China's rating has actually been upgraded to AA-, even though its fundamentals have deteriorated," the CEA said.
He expressed annoyance at what ''this differing treatment'' of India and China. "Rating agencies are inconsistent in their treatment of China and India," Subramanian said.
The government's 'Economic Survey 2017' too criticised the agencies for following "inconsistent" standards while rating India vis-a-vis China. It said these agencies didn't take into account reforms measures like the Goods and Services Taxes (GST) Bill, adding that this was a "poor" reflection of rating agencies' credibility.
BBB- is the lowest 'investment grade with stable outlook'. Fitch had last upgraded India's sovereign rating from BB+ to BBB- with stable outlook on 1 August 2006. Later, it changed the outlook to negative in 2012 and then again to stable in the following year, though it kept the rating unchanged at the lowest investment grade.
The rating agency said it expects India's growth rate to increase to 7.7 per cent in fiscals 2017 and 2018 from 7.1 per cent in fiscal 2016.
The NDA government has been consistently rolling out its ambitious reform agenda for almost three years and remains committed to continued reforms, the New York headquartered agency said.
"The impact of the reform programme on investment and real GDP growth will depend on how it is implemented and the extent to which government continues its strong drive to improve the still-weak business environment,'' the agency said.