KV Kamath, the first head of the Shanghai-based multilateral lending institution 'New Development Bank' (NDB) set up by BRICS nations has said that developing countries including India need to make a strong case for credit ratings upgrade and ensure that their voice is heard by the global agencies. Kamath said that 'We (India) should make a strong case (for rating upgrade). The developing countries will have to make a strong case for where they are and how they should be looked at.
India has often criticised methodology used by rating agencies like Moody’s and S&P which have pegged the country’s rating at a lower level at BBB-, despite dramatic improvement in growth and macro-economic stability since 2014.While, the government feels the agencies have not accounted for a steady decline in the India’s debt burden in recent years and have ignored its levels of development when assessing their fiscal strength. Better credit rating helps obtain loans in the international market at cheaper rates and boost investor confidence.
Last year, BRICS agreed to set up an independent ratings agency based on market-oriented principles saying it would further strengthen global governance architecture. At that time Kamath had expressed concerns over methodologies of the three global agencies (S&P, Fitch, Moody’s) saying that these constrain growth in emerging nations. He had said that ratings of multilateral banks like the BRICS-promoted NDB were affected by the parent countries’ ratings, despite having deep capital buffers.