India’s economic administrators’ attack on inconsistent credit rating standards of western agencies is now joined by the Chinese media. An article published in the partisan tabloid – the Global Times ‘Why India’s sovereign ratings lag behind China’, describes that foreign companies are correct in giving high ranking to China over India.
India’s Economic Survey brought out a box criticizing the methodology of credit rating agencies. Edited by Arvind Subramanian, the Survey made a comparative study of ratings on India and China while concluding that China gets a higher rating despite macro indicators are more or less the same.
According to the Writer, Zhou Hao, India may be similar to China in hard macro indicators like GDP and credit to GDP ratio. But credit rating is based on two other crucial aspects.
“One determines whether foreign capital will enter the country, and the other is to decide whether the country's bonds can be purchased by international investors.”
The article says that India’s external debt is only 20% of GDP and hence foreign reliance is weak.
The article postulate that India’s Ease of Doing Business Index is low at 130 compared to China’s 78. The article casually flies a statement that foreign investors doesn’t have a like towards India and this is reflected in ratings. “We could try to interpret India's sovereign rating from another perspective. If foreign capital is willing to move up their investment scale in India, this would exert pressure on the CRAs. After all credit rating is also a business and the CRAs react actively to clients' requests in terms of credit ratings.”
Despite having strong pro-Chinese analytics, the article doesn’t consider methodological aspects but blatantly conclude that credit rating agencies are correct.
Tags : credit rating agencies on india