PM says S&P ratings downgrade projection is 'crystal gazing'

PM says S&P ratings downgrade projection is 'crystal gazing'

PM says S&P ratings downgrade projection is 'crystal gazing'

Prime Minister Manmohan Singh on Thursday dismissed the projection by Standard & Poor’s (S&P) that there was a more than one-in-three chance of ratings downgrade for India calling it “crystal gazing”.

 “There is no chance of a downgrade,” Singh told reporters accompanying him on board his special aircraft to Russia to attend the eighth summit of the Group of 20 industrialised and big emerging economies at St Petersburg.

At a news briefing in Seoul on Tuesday, S&P analyst Kim Eng Tan said, “We have a negative outlook on India. We think the chance of a downgrade in the next one to two years is one out of three.”

Tan called the chance of a downgrade of India higher than that of Indonesia. Besides a widening Current Account Deficit (CAD) that has hurt India, the rupee has lost one-fifth of its value to a dollar this year.

Talking to reporters in New Delhi, Economic Affairs Secretary Arvind Mayaram said, the country has taken several measures to stabilise the economy despite the turmoil in the global economy.

He also wondered which mathematical model was relied upon by S&P to come to the statistical conclusion of a potential downgrade.

“I will be interested in really knowing why 33 per cent and not 32.5 per cent. There can be no mathematical model for that,” he said in a virtual snub to the rating agency.

Mayaram said there was no case for a rating downgrade as India has taken measures and will take measures in the future to the extent possible to stabilise the economy.
He also dismissed suggestions that domestic factors like lack of structural reforms had also contributed to the stunted growth of the Indian economy.

“There is case for greater reforms, deeper reforms. There is no reason to believe that reforms have not taken place,” he added.

Reacting to S&P’s projection, Industry body CII said, “The Indian economy should not be viewed through a prism of current account and fiscal deficits alone. The rating agencies should look at the fundamentals of the economy and the medium-term prospects.”