AS the nation fought the primary wave of the Covid-19 pandemic in mid-2020, the Ministry of Finance’s financial division was drafting a method to counter the “negative commentary” on India by international think-tanks, indices, and media, amidst issues that this might result in downgrading of sovereign score to “junk”.
In June 2020, then Principal Economic Advisor within the Ministry of Finance, Sanjeev Sanyal, ready a presentation — “Subjective Factors that impact India’s Sovereign Ratings: What can we do about it?” — for inside circulation throughout the authorities. Sanyal is now a member of the Prime Minister’s Economic Advisory Council.
The 36-page presentation, seen by The Indian Expressfamous that 18-26 per cent of a rustic’s sovereign score is predicated on subjective elements comparable to assessments on governance, political stability, rule of regulation, corruption, press freedom, and so forth.
“In most circumstances, India’s rating on these subjective elements is effectively beneath friends. This pulls down its sovereign scores,” it said. Rating agencies, according to Sanyal, used the World Bank’s World Governance Indicators (WGI) as a proxy for these subjective factors. Highlighting WGI as the single-most important index, it said, the inputs that go into the making of the WGI were “arbitrary” and primarily based on impressions from the Western press or small surveys of NGOs and a handful of teachers.
“There is a hazard that we might witness a drop in WGI scores because of the newest destructive commentary on India by suppose tanks, survey companies and worldwide media. This might probably downgrade our Sovereign Ratings to junk. Hence, it’s of utmost significance to achieve out to those think-tanks and survey companies and set a optimistic narrative about India generally,” Sanyal stated within the presentation.
When contacted by The Indian ExpressSanyal declined to remark, and stated: “We never comment on internal presentations.”
Observing that the majority reviews in 2019-20 projected a “negative commentary” on India, the presentation famous: “Specifically, Jammu and Kashmir Reorganization Act of 2019, Citizenship Amendment Act, 2019, National Register of Citizens and development of a Hindu temple at a disputed spiritual web site by Prime Minister Narendra Modi and his ‘Hindu nationalist’ Bharatiya Janata Party are seen as an train ‘focusing on Muslims’ and ‘threatening secular nature’ of our nation.”
In truth, Moody’s had downgraded India on June 1, 2020, from Baa2 to Baa3 (the bottom funding grade of scores) and maintained a destructive outlook. Amongst different causes, Moody’s had stated: “Governance is material to India’s credit profile and a material factor in today’s downgrade… Policymakers’ limited success in achieving stated objectives in recent years – an important aspect of governance under Moody’s definitions — together with Moody’s expectation that policymaking will remain challenged is an important driver in both the downgrade to Baa3 and the assignment of a negative outlook.”
Fitch Ratings too revised India’s outlook to destructive from steady on June 18, 2020, though it affirmed the score at BBB-. In its clarification, amongst different facets, Fitch stated, “Relations with Pakistan are, furthermore, negatively affected by the repeal of the particular standing for Kashmir and up to date adjustments to the standing of unlawful immigrants primarily based on their faith. A stronger focus by the ruling Bharatiya Janata Party on its Hindu-nationalist agenda for the reason that authorities’s re-election in May 2019 dangers changing into a distraction for financial reform implementation and will additional elevate social tensions.”
Sanyal stated the “consistent” destructive commentary about India was additionally changing into the opinion of sovereign score companies, and the finance ministry’s protests on such opinion reaped no outcomes. “Experience is that the rating agencies will usually go ahead and publish,” his presentation stated.
The authorities did attain out to sovereign score companies within the coming months. On October 5, 2021, Moody’s Investors Service raised the outlook on India’s sovereign score to ‘steady’ from ‘destructive’ in a revision after virtually two years, minimizing the possibilities of any score downgrade.
Both Moody’s and Fitch Ratings declined to touch upon queries despatched by The Indian Express.
Sanyal’s presentation stated the WGI was primarily based on 32 third get together sources and has been up to date yearly since 2002. Of these 32 information sources, 24 incorporate India, however not all sources rating international locations on all six WGI parameters. “The WGI scores run with a two-year lag. Hence, the most recent obtainable scores are for the 12 months 2018. However, most third-party sources publish their reviews yearly. The commentary in these reviews gives a transparent indication of which approach the scores will transfer within the coming years,” it stated.
“We need to reach out to the top third-party sources – initiate continuous discussions, clearly spell out the country’s reform measures and sensitize them of our internal matters,” it stated.
The authorities felt that there was a must preserve steady engagements with third get together sources of WGI to set “positive narrative about India in general” including that “last moment protests are of no use.” Most of those sources appear to be swayed by basic western media and NGO narratives somewhat than any in-depth goal evaluation, it stated, emphasizing “consistent narrative management is important”.
“In many cases, the think-tanks do not have an India expert or have not updated their information. Many of them base their rankings on cursory surveys of opinions from a small number of journalists/ NGOs/ academics. The government needs to think of ways to reach out to these agencies, initiate continuous discussions, clearly spell out the country’s reform measures and sensitize them on our internal matters and better understand their methodologies as well,” the presentation stated.
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In the evaluation of Sanyal’s group, the highest 15 information sources, whose scores have the utmost influence on India’s general WGI scores: Economist Intelligence Unit, World Justice Project, Political Risk Services International Country Risk Guide, WEF Global Competitiveness Report, Institutional Profiles Database, Global Insight Business Conditions & Risk Indicators, Bertelsmann Transformation Index, IFAD Rural Sector Performance Assessments, Institute for Management & Development World Competitiveness Yearbook, Varieties of Democracy Project, Freedom House, JET Country Security Risk Ratings, Cingranelli-Richards Human Rights Database & Political Terror Scale, Heritage Foundation Index of Economic Freedom, and Political Economic Risk Consultancy Corruption in Asia Survey.
About three – Economist Intelligence Unit, Varieties of Democracy (V-Dem) Project and Freedom House – have a destructive stance about India. “While the remainder 12 have a comparatively impartial stance, their India scores are both stagant or rising/falling regularly. These are low hanging fruits. We should goal them first in altering India’s notion. This is not going to solely assist in preserving our present sovereign scores but additionally in getting future upgrades,” it stated.
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With inputs from TheIndianEXPRESS
