{"id":79231,"date":"2021-02-01T14:31:28","date_gmt":"2021-02-01T09:01:28","guid":{"rendered":"https:\/\/blog.forumias.com\/?p=79231"},"modified":"2021-02-01T18:10:10","modified_gmt":"2021-02-01T12:40:10","slug":"indias-sovereign-ratings-dont-reflect-its-fundamentals","status":"publish","type":"post","link":"https:\/\/forumias.com\/blog\/indias-sovereign-ratings-dont-reflect-its-fundamentals\/","title":{"rendered":"India&#8217;s Sovereign Ratings don&#8217;t reflect its fundamentals"},"content":{"rendered":"<p><strong>Source:<\/strong> <a href=\"https:\/\/indianexpress.com\/article\/business\/economy\/sovereign-ratings-more-transparent-process-needed-7167151\/\">Indian Express<\/a>, <a href=\"https:\/\/www.thehindu.com\/business\/Economy\/indias-ratings-dont-reflect-economys-fundamentals-cea\/article33699155.ece%23:~:text=India's%20sovereign%20credit%20ratings%20do,more%20transparent%20and%20less%20subjective.&amp;text=China%20and%20India%20are%20the,rule%2C%E2%80%9D%20the%20CEA%20said.\">The Hindu<\/a><\/p>\n<p>Gs3: Indian Economy and issues relating to Planning, Mobilization of Resources, Growth, Development and Employment.<\/p>\n<p><strong>Synopsis:<\/strong> <strong>The Economic Survey 2020-21<\/strong> concludes that\u00a0<strong>sovereign credit ratings<\/strong> are biased, and they do not reflect the Indian economy\u2019s fundamentals.<\/p>\n<p><strong>Background:<\/strong><\/p>\n<ul>\n<li>Currently, India\u2019s sovereign rating is rated under a <strong>very low investment grade.<\/strong><\/li>\n<li>Though it will not impact market performance, rupee value against the dollar, or on G-Sec yield. But it can impact the <strong>FPI inflow into equity and debt instruments.<\/strong><\/li>\n<\/ul>\n<p><strong>On what basis the economic survey has made this remark?<\/strong><\/p>\n<ul>\n<li>As per the survey, it is for the first time in history, India, which is the fifth-largest economy in the world, has been rated as low in the investment-grade (<strong>BBB-\/Baa3).<\/strong><\/li>\n<li>Historically, the <strong>fifth-largest economies<\/strong> have been mostly rated <strong>AAA. It <\/strong>reflects the economic size and its ability to repay debt. China and India are the only exceptions to this rule.<\/li>\n<\/ul>\n<p><strong>What is the solution to address this issue?<\/strong><\/p>\n<ul>\n<li>The economic survey suggested <strong>reworking the sovereign credit rating<\/strong> methodology to make it more transparent and less subjective.<\/li>\n<li>It also called for co-operation among developing economies to address this bias and subjectivity, inherent in <strong>sovereign credit rating methodology.<\/strong><\/li>\n<\/ul>\n<p><strong>What are the other factors affecting investment according to the Economic survey? <\/strong><\/p>\n<ul>\n<li>The Economic survey pointed out the issue of <strong>over-regulation in the Indian economy<\/strong>.\u00a0The survey suggested <strong>simplification of regulatory processes<\/strong> along with transparent decision-making processes.<\/li>\n<li>The survey also highlighted the problem of <strong>asymmetric information<\/strong> between the regulator and the banks which was noticed during the <strong>forbearance regime.<\/strong> (short-term relief for borrowers to postpone loan payments-Witnessed during the Pandemic)\n<ul>\n<li style=\"list-style-type: none;\">\n<ul>\n<li>The survey suggested conducting an <strong>Asset Quality Review exercise<\/strong> immediately after the forbearance is withdrawn.<\/li>\n<\/ul>\n<\/li>\n<\/ul>\n<\/li>\n<\/ul>\n<p>India\u2019s willingness to pay debts is demonstrated often through its <strong>zero sovereign default history. <\/strong>So, the current sovereign ratings are not a representation of India&#8217;s growth and commitments.<\/p>\n","protected":false},"excerpt":{"rendered":"<p>Source: Indian Express, The Hindu Gs3: Indian Economy and issues relating to Planning, Mobilization of Resources, Growth, Development and Employment. Synopsis: The Economic Survey 2020-21 concludes that\u00a0sovereign credit ratings are biased, and they do not reflect the Indian economy\u2019s fundamentals. Background: Currently, India\u2019s sovereign rating is rated under a very low investment grade. Though it&hellip; <a class=\"more-link\" href=\"https:\/\/forumias.com\/blog\/indias-sovereign-ratings-dont-reflect-its-fundamentals\/\">Continue reading <span class=\"screen-reader-text\">India&#8217;s Sovereign Ratings don&#8217;t reflect its fundamentals<\/span><\/a><\/p>\n","protected":false},"author":61,"featured_media":79449,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"jetpack_post_was_ever_published":false,"footnotes":""},"categories":[9],"tags":[1398,1580],"class_list":["post-79231","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-public","tag-eco_6","tag-economic_survey_21","entry"],"jetpack_featured_media_url":"https:\/\/i0.wp.com\/forumias.com\/blog\/wp-content\/uploads\/2021\/01\/Indias-Sovereign-Ratings-dont-reflect-its-fundamentals.jpg?fit=1280%2C720&ssl=1","views":{"total":32,"cached_at":""},"jetpack_sharing_enabled":true,"_links":{"self":[{"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/posts\/79231","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\/61"}],"replies":[{"embeddable":true,"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/comments?post=79231"}],"version-history":[{"count":0,"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/posts\/79231\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/media\/79449"}],"wp:attachment":[{"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/media?parent=79231"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/categories?post=79231"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/tags?post=79231"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}