Govt extremely disappointed with Moody's report on India's economic outlook
New Delhi, Aug 24, 2023
The government also criticised Moody's comment that it expects high nominal GDP growth and ongoing fiscal consolidation to "stabilise the government debt burden at high levels
The government has expressed "extreme disappointment" with the latest report from the Moody's rating agency concerning India's economic outlook. A senior government official has labelled the report as highly contradictory, calling into question the credibility of the rating agency.
The senior official took issue with Moody's statement: "India's fiscal strength remains a key weakness in the sovereign credit profile," remarking, "How can my strength be my weakness? Moreover, they are unwilling to have a like-to-like comparison with India."
The government also criticised Moody's comment that it expects high nominal GDP growth and ongoing fiscal consolidation to "stabilise the government debt burden at high levels." The senior official noted that Moody's has not defined what constitutes a high level of debt, adding, "Bulk of our borrowing is domestic."
Moody's had previously asserted, "High GDP growth will contribute to gradually rising income levels and overall economic resilience. In turn, this will support gradual fiscal consolidation and government debt stabilisation, albeit at high levels."
However, the official chose not to comment on the political undertones in Moody's report, which discussed "a curtailment of civil society and political dissent, which, compounded by rising sectarian tensions, support a weaker assessment of political risk and the quality of institutions."
Global rating agencies have often faced criticism from the Indian government for failing to acknowledge improvements in macroeconomic parameters. During his tenure as economic affairs secretary, Reserve Bank of India (RBI) governor Shaktikanta Das accused the agencies of being several steps behind reality, and of missing out on aspects that only they could best explain.
Arvind Subramanian, a former chief economic adviser, has also previously stated that the rating agencies have followed "inconsistent" standards when rating India and China.
On 18 August, Moody's Investors Service confirmed India's long-term local and foreign-currency sovereign ratings and maintained a stable outlook.
The agency said that India's long-term local and foreign-currency issuer ratings, as well as the local-currency senior unsecured rating, remain at Baa3, while the short-term local-currency rating is at P-3.
Back in 2016, during its BRICS presidency, India proposed the creation of a credit rating agency under the BRICS umbrella. The goal was to challenge the existing credit rating system, which is dominated by three global rating agencies that India regards as biased against developing countries.
[The Business Standard]
