'Extremely problematic': India's CEA calls for dismantling oligopoly of Moody's, S&P and Fitch

Questioning the methodology of global rating agencies, India's CEA V Anantha Nageswaran pressed for the dismantling Moody’s, Standard & Poor, and Fitch's "oligopoly".

India’s economy, despite rising to the world’s fifth-largest from the 12th over 15 years, remains in the lowest investment grade assigned by the agencies. This has dismayed Nageswaran, who attributes the low rating to the over-reliance of rating agencies on qualitative parameters.

In an interview to Hindu Businessline, Nageswaran questioned their methodology and sources of information. The rating agencies rely on World Bank’s World Governance Index for inputs, which he called as “extremely problematic” because the details are not provided by the countries assessed but by “think-tanks or research bodies sitting in some European countries.”

Nageswaran called WGI as “opaque” as it does not take into consideration the stage of development of a country. India has often criticised the over-reliance on non-transparent qualitative factors in sovereign rating, including perceptions, value judgements, views of a limited number of experts, and surveys with loose methodologies, which they believe result in unacceptable outcomes globally.

In her post-Budget press conference, Finance Minister Nirmala Sitharaman had said rating agencies should take note that the government has not only aligned with the fiscal consolidation roadmap but also bettered it.

India's gripe with ratings agencies is an old one.
In 2016, Arun Jaitley, then finance minister, had expressed dissatisfaction with the global rating agencies. "I must acknowledge and state that the kind of steps we have taken, we still have not got from international agencies the full recognition of the effort we have put in," he said.

In the Economic Survey 2016-17, Arvind Subramanian, then chief economic advisor, had highlighted what he termed the "poor standards" of the rating agencies. He had pushed for an independent BRICS nations rating agency, aimed at creating appropriate ratings standards for the emerging market economies, to provide an alternate view to the three Western rating agencies.