The government today slammed global rating agencies for not upgrading India's sovereign rating despite a slew of reforms, saying they need to do some "introspection" as investors globally feel the country is "under-rated".
Talking to reporters after S&P Global Ratings ruled out an upgrade for India for next 2 years, while retaining rating at lowest investment grade 'BBB-', Economic affairs secretary Shaktikanta Das said the government will continue to adhere to the path of economic reforms and policies.
"If the rating has not been improved, it's a matter which doesn't bother us so much. It's a question which calls for an introspection among those who do the rating," Das said.
He said global investors feel India is highly "under- rated".
"There is a disconnect, therefore, between what the investors are thinking of, what they have in their mind, and (what) the rating agencies are concluding. I think somewhere there is a disconnect," he said.
Das cited various steps taken by the government in the last two years, including controlling inflation and structural reforms like GST and bankruptcy.
"If you compare the various factors which the report itself talk about, is there any other economy that equals this? So with all this, if there is no improvement, I think it's a matter for the rating agency itself to put a question to itself and perhaps undertake a kind of introspection," Das said.
The government will continue to adhere to the path of economic reforms as well as various policy initiatives and it's for the rating agencies to take their own view, he added.
"I am not questioning anybody's methodology now. It's a detailed report we have to go through. They are independent rating agencies. And we value their comments...And attach a lot of importance to the comments and observations of all the rating agencies," he said.
Das recalled Moody's upgrading India's rating in 2004
saying that it was because of improvement in external sector as also reduction in economic vulnerabilities.
"Even on those parameters today, compared to 2004, India stands in a far, far, far stronger footing. So, therefore, government will continue to undertake the measures that are necessary to strengthen the economy, improve GDP growth, create
employment and that process will continue," Das said.
Moody's Investors Service had in 2004 upgraded India to 'Baa3' rating in two key rating categories due to reduction in external vulnerability, rising foreign investment and vibrant economic growth.
It upgraded India's country ceiling for foreign currency bonds as well as the government's foreign currency issuer rating to Baa3 from Ba1, with a stable outlook.
Das said the rating agency has given emphasis on India's sound external position, inclusive economic reform agenda. It also recognises that India is continuing structural reforms, and the ability of system to retain inflation below 5 per cent.
"The report of S&P says all the right things and everything that has been done about India... Now, with all these if the rating has not been improved, it is a matter which does not bother us so much but its a question which calls for an introspection among those who do the rating," Das said.
Going forward, S&P said they would like to see that government's fiscal performance continues to be very robust.
With regard to banking sector, S&P said the private banks have better profitability, higher internal capital generation and capitalisation with lower-stressed assets than PSU banks.
Asked about concerns over banking sector expressed by S&P, Das said: "The government has undertaken a number of measures to address these issues. It is nothing that is not known to us and that will continuously engage the attention of the government."
S&P estimated that PSU banks need capital infusion of about USD 45 billion by 2019, given their weak profitability, to meet Basel III capital norms, as against USD 11 billion support pledged by the government.
The government may have to increase the allocation if banks are not able to secure capital from alternative sources, such as equity markets, additional tier-1 bonds, and insurance companies, S&P added.
