Economic Survey: India's unfair credit rating
The government's latest Economic Survey accuses global rating agencies of a bias against the country. This may be true, but not because our economy is too large to be rated poorly, as the Survey argues, but because of our good repayment record on sovereign debt
India has long harboured a sense of grievance against international credit rating agencies, and rightly so, given the discrepancy between its broad economic stability and the often-lousy grades that it is assigned. The Economic Survey for 2020-21, which was tabled in parliament on Friday, charged international credit rating agencies with prejudice against emerging economies such as India and China. The annual document, which details how the various facets of our economy fared last year, however, has used economic size as an argument. Historically, it says, the economy that is the world’s fifth-largest has “predominantly" been rated AAA, S&P’s top rating, an indication that it has been assessed to be comfortably placed to pay off its sovereign debt. And is therefore highly credit-worthy. By contrast, India, which displaced the UK in 2019 as the world’s fifth-largest, has been rated BBB-, the lowest investment grade. Anything lower, and various pension funds etc in the West would be obliged to stay away from Indian-issued bonds.