CEA slams rating agencies for undermining India growth story

Chief Economic Adviser (CEA) Arvind Subramanian on Thursday slammed the international rating agencies for maintaining India’s rating at BBB-, despite economic fundamentals such as inflation, growth and current account performance improving.

“In recent years, rating agencies have maintained India’s BBB- rating, notwithstanding clear improvements in our economic fundamentals, such as inflation, growth, and current account performance,”  Subramanian said here.
Delivering the sixth VKRV Rao Memorial Lecture on ‘Competence, Truth & Power: Macroeconomic Commentary in India’, organised by the Institute for Social and Economic Change (ISEC) at Raj Bhavan in the city, the CEA said at the same time, China’s rating had been upgraded to AA- even though its fundamentals have deteriorated.
Noting that the rating agencies have been inconsistent in their treatment of India and China, the CEA wondered why their analysts should be taken seriously at all, given their track record of poor standards.
“The assessment of these rating agencies has been questioned in light of their failure to provide warnings in advance of financial crises and often their downgrades have occurred post-facto,” Subramanian said.Observing that the role of ratings agencies has increasingly come into question, the CEA said in the US financial crisis, questions were raised about their role in certifying as AAA bundles of mortgage-backed securities that had toxic underlying assets.
Karnataka Governor Vajubhai R Vala, ISEC Director Chandrakant and other dignitaries were present on the occasion.DH News Service