Economic Survey slams Credit Rating Agencies, says they do not reflect India's economic fundamentals

The Economic Survey 2020-21 has slammed the Credit Rating Agencies' methodology that has led to undermining of India's sovereign credit ratings.

The Survey questioned the sovereign credit ratings and stated that these do not capture correctly the strong economic fundamentals of India.

It calls for larger engagements with Credit Rating Agencies for amending their methodology which captures he ability of the economies to pay their external obligations.


The Survey says that these "noisy, opaque and biased" ratings damage FPI flows into the country.

"While sovereign credit ratings do not reflect the Indian economy’s fundamentals, noisy, opaque and biased credit ratings damage FPI flows. Sovereign credit ratings methodology must be amended to reflect economies’ ability and willingness to pay their debt obligations by becoming more transparent and less subjective," the Survey notes.

It further says that India has never defaulted in its sovereign obligations.

"India’s willingness to pay is unquestionably demonstrated through its zero sovereign default history. India’s ability to pay can be gauged not only by the extremely low foreign currency denominated debt of the sovereign but also by the comfortable size of its foreign exchange reserves that can pay for the short term debt of the private sector as well as the entire stock of India's external debt including that of the private sector," the Survey highlights.