{"id":274970,"date":"2023-12-23T20:23:43","date_gmt":"2023-12-23T14:53:43","guid":{"rendered":"https:\/\/forumias.com\/blog\/?p=274970"},"modified":"2023-12-23T20:23:43","modified_gmt":"2023-12-23T14:53:43","slug":"issue-related-to-credit-rating-ceas-concerns-apart-india-needs-better-data","status":"publish","type":"post","link":"https:\/\/forumias.com\/blog\/issue-related-to-credit-rating-ceas-concerns-apart-india-needs-better-data\/","title":{"rendered":"Issue related to Credit rating – CEA\u2019s concerns apart, India needs better data"},"content":{"rendered":"

Source<\/strong>: The post is based on the article\u00a0\u201c<\/strong>CEA\u2019s concerns apart, India needs better data\u201d<\/strong>\u00a0published in\u00a0\u201cIndian Express<\/strong>\u201d\u00a0on 23rd<\/sup> December 2023.<\/p>\n

UPSC Syllabus Topic:<\/strong>\u00a0GS Paper 3 \u2013 Economy \u2013 Indian Economy and issues relating to Planning, Mobilization of Resources, Growth, Development\u00a0and\u00a0Employment.<\/p>\n

News<\/strong>:\u00a0India has experienced substantial economic growth in recent years. However, credit rating agencies (CRAs) have not correspondingly raised its sovereign credit rating.<\/p>\n

How have various credit rating agencies (CRAs) rated India’s sovereign credit?<\/strong><\/h2>\n

S&P Global and Fitch: <\/strong>They both raised India’s sovereign credit rating to BBB, marking the lowest investment grade.<\/p>\n

Moody’s: <\/strong>It initially upgraded India from the lowest investment grade (Baa3) to the next level (Baa2) in November 2017 but later reversed this upgrade to Baa3 in June 2020.<\/p>\n

India receiving such ratings despite being the fifth largest economy raises concerns regarding the opaque methodologies used by<\/strong> CRAs.<\/p>\n

What concerns exist regarding the methodologies employed by CRAs?<\/strong><\/h2>\n

Focus on Subjective Factors:<\/strong> CRAs rely too heavily on subjective qualitative factors like good governance and democracy while neglecting objective measures of a country’s ability and willingness to repay debt.<\/p>\n

Concerns with Governance Indicators:<\/strong> Governance indicators used by CRAs explain only 68% of India’s rating.<\/p>\n

This is because a country’s macroeconomic fundamentals, like GDP growth, inflation, and debt levels, are ultimately the key determinants of its ability to pay debt.<\/p>\n

Hence, even if India improves its economic fundamentals, it might not affect its credit rating significantly due to the heavy reliance of CRAs on subjective factor like “governance indicators”.<\/strong><\/p>\n

Read More: <\/strong>India’s Sovereign Ratings don’t reflect its fundamentals<\/strong><\/a><\/p>\n

What can be the way ahead for India?<\/strong><\/h2>\n

Fiscal Consolidation:<\/strong> India needs to reduce the government debt-to-GDP ratio, currently at 82%, to levels seen in 2006 (77.2%) and 2010 (66.4%).<\/p>\n

Data Quality:<\/strong> There are absence of Census or household consumer expenditure survey results post-2011-12. Hence, India needs to improve its data accuracy and transparency by conducting required surveys.<\/p>\n

Question for Practice:<\/strong> Critically analyze the challenges associated with the comparatively low sovereign credit ratings assigned to India by Credit Rating Agencies (CRAs). Suggest necessary measures to alleviate these concerns.<\/p>\n","protected":false},"excerpt":{"rendered":"

Source: The post is based on the article\u00a0\u201cCEA\u2019s concerns apart, India needs better data\u201d\u00a0published in\u00a0\u201cIndian Express\u201d\u00a0on 23rd December 2023. UPSC Syllabus Topic:\u00a0GS Paper 3 \u2013 Economy \u2013 Indian Economy and issues relating to Planning, Mobilization of Resources, Growth, Development\u00a0and\u00a0Employment. News:\u00a0India has experienced substantial economic growth in recent years. However, credit rating agencies (CRAs) have not… Continue reading Issue related to Credit rating – CEA\u2019s concerns apart, India needs better data<\/span><\/a><\/p>\n","protected":false},"author":10320,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"jetpack_post_was_ever_published":false,"footnotes":""},"categories":[1230,167,9],"tags":[216,8184,10500],"class_list":["post-274970","post","type-post","status-publish","format-standard","hentry","category-9-pm-daily-articles","category-economy-subject","category-public","tag-gs-paper-3","tag-indian-economy","tag-indian-express","entry"],"jetpack_featured_media_url":"","views":{"total":2,"cached_at":"","cached_date":1703374415},"jetpack_sharing_enabled":true,"_links":{"self":[{"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/posts\/274970","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/users\/10320"}],"replies":[{"embeddable":true,"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/comments?post=274970"}],"version-history":[{"count":0,"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/posts\/274970\/revisions"}],"wp:attachment":[{"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/media?parent=274970"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/categories?post=274970"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/tags?post=274970"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}