The Economic Survey 2016-17 questioned the methodology of credit rating agencies while assessing different countries.
“If per capita GDP is a key to upgrading sovereign ratings as suggested by Standard and Poor’s while maintaining a status quo on India in Novemeber 2016, then poorer countries might be provoked into saying, please do not bother this year, come back to assess after half a century,” the survey’s author Arvind Subramanian told reporters, explaining the contrast in rating behaviour.
In 2009, China launched a historic credit expansion, which has so far seen the credit-GDP ratio rise by an unprecedented about 63 percentage points of GDP, much larger than the stock of India’s credit-GDP. At the same time, Chinese growth has slowed from over 10% to 6.5%, the survey said, asking, “How did Standard and Poor’s react to this ominous scissors pattern, which has universally been acknowledged as posing serious risks to China and indeed the world?”
“These contrasting experiences raise a question: can they really be explained by an economically sound methodology,” he said.
