Chief Economic Adviser Arvind Subramanian on Tuesday slammed global rating agencies for following "inconsistent" standards while rating India in comparison to China. They have not taken into account reforms measures like the Goods and Services Tax, which is a "poor" reflection on their credibility, he said.
Subramanian said India has also taken reform initiatives like liberalising FDI, bankruptcy code, monetary policy framework agreement and Aadhaar Bill.
Despite all these achievements, it is very interesting that the rating agencies have not reflected this... We have shown (in the Survey) what kind of inconsistent standards the rating agencies have. We call these poor standards because S&P said last year that there is no way they could upgrade India because of GDP and fiscal deficit.Arvind Subramanian, Chief Economic Adviser
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U.S.-based Standard & Poor's (S&P) had in November ruled out an upgrade in the country's sovereign rating for some considerable period, citing India's low per capita GDP and relatively high fiscal deficit.
"The actual methodology to arrive at this rating was clearly more complex. Even so, it is worth asking: are these variables the right key for assessing India's risk of default?" the Economic Survey asked.
India's government debt-to-GDP ratio stands at 68.5 percent.
Subramanian said S&P has rated China six grades above India and has held China's ratings steady since 2010 despite economic growth slowing to 6.5 percent from 10 percent. In contrast, India's has moved in the opposite direction and growth has increased.
Yet how did the rating agencies behave? They despite all these risky developments they did not downgrade China and our rating was maintained six notches below China. This is reflection on how these institutions work. You should question them.Arvind Subramanian, Chief Economic Adviser
The pre-budget Economic Survey said S&P in December 2010 increased China's rating from A+ to AA and despite the "ominous scissors pattern" of Chinese economy, and declining growth has not downgraded it.
"In contrast, India's ratings have remained stuck at the much lower level of BBB-, despite the country's dramatic improvement in growth and macro-economic stability since 2014. These contrasting experiences raise a question: can they really be explained by an economically sound methodology?" the Survey said.
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