CEA: Rating surge must align with economic fundamentals

New Delhi

The Economic Survey presented in Parliament on Friday expressed concern over lower sovereign rating assigned by agencies like Fitch, S&P and Moody’s to India despite its strong economic fundamentals.

“We have made the case very very forcefully (to rating agencies)...These changes happen over time. They don’t happen instantaneously, but you have to continue making efforts,” he said.

Survey said sovereign credit ratings methodology must be amended to reflect economies’ ability and willingness to pay their debt obligations, and suggested that developing economies must come together to address this bias and subjectivity inherent in sovereign credit ratings methodology.

“Never in the history of sovereign credit ratings has the fifth largest economy in the world been rated as the lowest rung of the investment-grade (BBB-/Baa3). While sovereign credit ratings do not reflect the Indian economy’s fundamentals, noisy, opaque and biased credit ratings damage FPI flows,” the survey said.

It is imperative countries engage with credit rating agencies to make the case their methodology must be corrected.