FM: Credit Rating Agencies Must Revise Their Methodologies
Karnataka News
Finance Minister Nirmala Sitharaman has advocated for “improvements in methodology” among global credit rating agencies to accurately capture the fundamentals indicating a nation’s ability and readiness to repay its debts. Speaking in Washington, D.C., she stated that sovereign ratings should reflect the macroeconomic fundamentals of emerging markets and developing economies, including their cost of capital and capacity to attract private investment.
Sitharaman made these remarks during the plenary session of the International Monetary and Financial Committee at the annual meetings of the International Monetary Fund (IMF) and the World Bank Group, as noted in a post by the finance ministry on the social media platform X.
Experts and senior government officials have frequently criticized global rating agencies for their perceived bias against emerging economies, suggesting that these nations receive unfavorable evaluations. Despite India being the fastest-growing major economy globally since 2021-22, agencies like S&P, Moody’s, and Fitch continue to assign the country the lowest investment-grade sovereign ratings. The IMF projects that India will maintain this status until 2025-26, further highlighting the disconnect between the country’s economic performance and credit ratings.
The IMF projects robust growth rates for India—7% for the current fiscal year and 6.5% for the following year—both figures more than double the global averages.
Speaking separately at the Centre for Strategic and International Studies in the U.S. capital, the minister emphasized that no sector in India is off-limits for private investors. She pointed out that private players are now actively entering sensitive fields such as defense production and space exploration.
Under Prime Minister Narendra Modi‘s leadership, the restrictive ‘license raj’, a system of government permits required for setting up and running businesses in India during the socialist era, has been left behind. Bureaucratic hurdles have been transformed into a ‘red carpet’ for investors, symbolizing the significant shift in India’s investment climate.
Finance Minister Sitharaman posed a crucial question to the global investment community, asking, “What’s holding global investors back?” She underscored India’s immense growth potential and urged international entities to seize the opportunity and increase their investments in the country. Her call carries a sense of urgency, emphasizing the need for global investment in India’s promising economy.
“I want to ask where are the investable funds, where are the global investors, what are they looking at? What’s holding them back? So that’s a question I like to pose,” she said at the CSIS.
An “appreciable” amount of FDI, she stressed, is very much flowing into India. “But with that coming, I still would think there’s more opportunity lying. And with all the conversation being China-plus one, shared values, democracies, English speaking, demographic dividend, with skill sets of Indian youth being so good that they are manning the GCCs (global capability centres)… So the question would be: What’s holding them back?” she asked.
Finance Minister Sitharaman reassured the audience that nothing is impeding the Indian economy at the moment. She confidently stated, “The policies are working. Reforms are still happening, and it shall continue to happen. Greater liberalisation of the economy will be there.” Her optimism about the Indian economy is palpable, instilling a sense of confidence in the audience.
Soft Landing for the Global Economy
Finance Minister Nirmala Sitharaman expressed cautious optimism about the potential for a soft landing for the global economy, which has endured significant challenges and stress over the past several years. She believes improved conditions may be on the horizon, mainly due to the coordinated efforts and collaborative actions among nations and multilateral financial institutions. However, the minister also urged caution against undue optimism, highlighting that many economies are not genuinely experiencing a robust recovery. She emphasized that the global trade landscape remains precarious, suggesting that while there are signs of improvement, substantial hurdles still lie ahead.
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