CEA Subramanian slams global rating agencies for China bias
Chief economic advisor Arvind Subramanian on Thursday slammed global rating agencies for not upgrading the India’s ranking despite robust economic performance in the past few years.business Updated: May 11, 2017 15:54 IST
Chief economic advisor Arvind Subramanian on Thursday slammed global rating agencies for not upgrading the India’s ranking despite robust economic performance in the past few years.
“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,” he said here.
“In other words, the ratings agencies have been inconsistent in their treatment of China and India. Given this record —- what we call Poor Standards -- my question is: why do we take these rating analysts seriously at all?,” he said.
Citing example of the sub-prime crisis, he said questions were raised about their role in certifying as AAA bundles of mortgage-backed securities that had toxic underlying assets in the US financial crisis of 2008.
Delivering VKRV Memorial Lecture, he said, on the domestic side, there is a clear relationship between expert analysis and official decisions.
“Before policy decisions, the expert analysis is often illuminating. But once the decisions are taken, it is truly striking how the tune and tone of the analysis changes. Analysts fall over backwards to rationalise the official decision,” Subramanian said.
Economic Affairs Secretary Shaktikanta Das had also expressed dismay last week saying that global rating agencies are far detached from ground realities and must introspect as the reforms initiated certainly warranted an upgrade.
In past too, India has questioned the methodology used by them saying that the country compares favourably with other emerging countries on metrics such as default risk.
In particular, it has pointed to S&P Global Ratings keeping China at AA- despite rising debt and slowing growth while India has been kept at just one step above junk.
Moody’s and Fitch too give similar rating citing Asia’s widest fiscal deficit as a drag on the nation’s sovereign rating.
Subramanian had earlier also criticised China and said India does not politically fix economic numbers. “I do firmly believe that India is not China, we are not politically fixing (GDP) numbers by any means,” Subramanian had said.
“But I do think, we need to make sure that quality of data is updated. So that people have confidence in our GDP data,” he added.
The CEA’s statement assumes significance as experts and economists have raised doubts on India’s 2016-17 growth forecast of 7.1% despite the impact of demonetisation in the third quarter of the fiscal.
Multilateral agencies such as International Monetary Fund and World Bank have in the past few years coined as a “bright spot” in an otherwise gloomy global economy.
India’s GDP growth has averaged well over 7% in the last three years while fiscal and current account deficit (CAD) have been reigned in.
First Published: May 11, 2017 15:54 IST