Corporate Affairs Minister Veerappa Moily on Wednesday slammed rating agencies for factoring in political parameters in downgrading India’s credit rating outlook. He asserted there was no economic “tsunami” in India.
“While rating countries, credit rating agencies need to redesign some of their parameters and confine to economic parameters. These agencies are using political parameters, too, to downgrade India’s credit outlook,” Moily said on the sidelines of an Associated Chambers of Commerce and Industry event.
Credit rating agencies Standard & Poor’s (S&P) and Fitch Ratings have cut their outlook on India’s sovereign rating from stable to negative. S&P had cited India’s political climate as a factor for cautioning against a rating downgrade.
“Just because the last two quarters (of 2011-12) have not been that good, it doesn’t mean there is an economic tsunami. There is no economic crisis in the country,” Moily said.
India’s economic growth slipped to just 5.3 per cent in the last quarter of 2011-12. This was the lowest in at least 32 quarters. In the third quarter of last financial year, growth stood at 6.1 per cent, against 8.2 per cent in the corresponding period of the previous financial year. For 2011-12, economic growth stood at 6.5 per cent, the lowest in nine years.
While cutting the outlook on India's sovereign rating, S&P had said the crux of the current political hurdle towards economic liberalisation was, in its view, the nature of the leadership in the central government, not obstreperous allies or the opposition. “The Congress party is divided on economic policies. There is substantial opposition within the party to any serious liberalisation of the economy,” it had said.
Paramount political power rests with the leader of the Congress party, Sonia Gandhi, who holds no Cabinet position, while the government is led by an unelected prime minister, Manmohan Singh, who lacks a political base of his own, it added.
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Currently, India has the lowest investment grade, both in the S&P, as well as the Fitch ratings. Any further cut in the ratings would mean junk-grade.
Corporate Affairs Minister Veerappa Moily slammed rating agencies, asserting there was no economic “tsunami” in India.