India's Chief Economic Advisor Arvind Subramanian has said that global rating agencies have inconsistent and poor standards while rating India vis-a-vis China. He added that agencies have not taken into account government’s reforms initiatives such as FDI liberalisation, bankruptcy code, monetary policy framework agreement, GST and Aadhaar Bill, which is a ‘poor’ reflection on their credibility.
Subramanian said that per capita GDP, which is a factor taken into account by rating agencies for upgrade, is a very slow moving variable. He named these poor standards because last year US-based Standard & Poor’s (S&P) said that there is no way they could upgrade India because of GDP and fiscal deficit. In November, S&P ruled out an upgrade in the India’s rating for some considerable period, citing country’s low per capita GDP and relatively high fiscal deficit.
He also said that S&P has rated China six grades above India and since 2010 it has held China's ratings steady despite economic growth slowing to 6.5 per cent from 10 per cent. In contrast, India's has moved in the opposite direction and growth has increased. He added that the practice of ratings agencies to combine a group of countries and then measure comparatively their fiscal outcomes shows India is an outlier because its high debt-GDP ratio and debt of 67.1 per cent are out of line with its emerging market peers.
Meanwhile, the pre-budget Economic Survey has noted that in December 2010, S&P increased China's rating to AA from A+ and despite the ominous scissors pattern of Chinese economy, and declining growth has not downgraded it. In contrast, India's ratings have remained stuck at the much lower level of BBB-, despite the country's dramatic improvement in growth and macro-economic stability since 2014.