Economic Survey 2021: Calls For Change In Sovereign Rating Methodology

Economic Survey 2021 tabled by the Finance Minister earlier today in the Parliament said that sovereign credit rating of India does not truly highlights its fundamentals. The Survey asked for a change in the sovereign rating methodology as the globally fifth leading economy cannot be BBB-rated.

Economic Survey 2021: Calls For Change In Sovereign Rating Methodology

"Never in the history of sovereign credit ratings has the 5th largest economy been rated as the lowest rung of investment-grade (BBB -). India's fiscal policy must not remain beholden to a noisy, biased measure of India's fundamentals. India's forex reserves can cover an additional 2.8 standard deviation negative event. It is imperative that sovereign credit rating methodology be made more transparent, less subjective," it said.

Further the Survey mentioned that China too is criticizing the methodology adopted by international rating agencies, saying their methodology suits developed economies and not EMs.

Moreover, the survey estimates India's current account to log a surplus of 2 percent. The last time the surplus was made was in FY03 when the exports dived owing to a weak economy. The current account balance is the difference between exports and imports of goods and services.

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