First on TFIPOST: Modi govt’s 2021 Economic Survey exposes credit standing companies for bias in opposition to India

The Modi authorities has launched the Economic Survey 2020-21 in the present day. The Economic Survey of this 12 months has 10 chapters and is 353 pages lengthy. The Survey talks a couple of vary of subjects together with India’s prioritization of lives over livelihoods throughout the pandemic, which, as per the survey, will assist India in posting higher financial development in comparison with areas that prioritized livelihoods (just like the USA and elements of Europe) within the coming quarters.The Survey additionally talks concerning the Ayushman Bharat scheme in chapter 9 which is titled ‘JAY Ho: Ayushman Bharat’s Jan Arogya Yojana (JAY) and Health Outcomes’. The Survey quotes Martin Luther King Jr., the American Civil Rights Activist, on well being. The well-known quote goes as, “Of all the forms of inequality, injustice in healthcare is the most shocking and most inhuman.”The survey argues that the Ayushman Bharat Yojna helped the poor individuals of the nation an awesome deal even throughout the pandemic. “PM-JAY is being used significantly for high frequency, low cost care such as dialysis and continued to be utilised without disruption even during the Covid pandemic and the lockdown. General medicine – the overwhelmingly major clinical specialty accounting for over half the claims – exhibited a V-shaped recovery after falling during the lockdown and reached pre-Covid-19 levels in December 2020,” reads the survey.However, an important chapter on the Survey is one on the prejudices of the credit standing companies in opposition to rising economies like India. The survey criticizes the low scores of India and China, with historic knowledge and references. “Never in the history of sovereign credit ratings has the fifth largest economy in the world been rated as the lowest rung of the investment grade (BBB-/Baa3). Reflecting the economic size and thereby the ability to repay debt, the fifth largest economy has been predominantly rated AAA. China and India are the only exceptions to this rule – China was rated A-/A2 in 2005 and now India is rated BBB-/Baa3. Do the fundamentals that supposedly drive sovereign credit ratings rationalise this historical anomaly? In this chapter, the Survey asks this important question and answers a resounding No!” reads the Economic Survey.The Economic Survey argues that international locations like India and China have very excessive debt repayability capability given the excessive price of development, however the credit standing companies, most of that are based mostly within the developed markets, are prejudiced in opposition to the creating international locations and hold their scores low regardless of the information suggesting the opposite.“As ratings do not capture India’s fundamentals, it comes as no surprise that past episodes of sovereign credit rating changes for India have not had a major adverse impact on select indicators such as Sensex return, foreign exchange rate and yield on government securities. Past episodes of rating changes have no or weak correlation with macroeconomic indicator,” reads the third chapter of the survey which is titled- Does India’s Sovereign Credit Rating replicate its fundamentals No!Given the very fact India’s macroeconomic fundamentals are among the many strongest for any main economic system on the planet, the ranking companies should put the nation within the high class. “Despite ratings not reflecting fundamentals, they can however be pro-cyclical and can affect equity and debt FPI flows of developing countries, causing damage and worsening crisis. It is therefore imperative that sovereign credit rating methodology be made more transparent, less subjective and better attuned to reflect economies’ fundamentals,” reads the survey.The ranking given by companies is essential for the nation as a result of it impacts a rustic’s potential to boost debt at a decrease price. Today international locations just like the United States increase debt at rates of interest close to zero whereas India has to pay above 5 p.c rates of interest, simply because the ranking companies are prejudiced.