There was a time, not long ago, so much of economic power was concentrated in the hands of international raters.
Post the Pokhran nuclear test, raters were the first to strike with a downgrade even ahead of economic sanctions. Sanctions were lifted post realising that they were harming US/ UK/Japan corporates who could not continue business with Indian entities (supplier/ buyer/technology collaborator/ JV partner etc.).
But the rating downgrade did hurt with ‘off shore’ borrowing cost escalating . When the then PM Atalji encouraged the scientists to complete the task, economists and economic advisers warned of downgrade. Atlaji – ‘The Indomitable’ had the political will to go ahead and was prepared for dealing with downgrade and sanctions. The one & only Dr APJ .Kalam handpicked by Atalji ensured that ‘The Buddha laughed’ without any international agency figuring out till the official announcement. The blast was ‘below the radar’!
Therefore muted reaction to the present sovereign rating downgrade is a respite. Yes this time around, ‘it is a global issue’ or ‘Black swan event’ – say what you
want – But the raters have lost some sheen and hopefully some of their raw economic power. They also have many a question to answer .
- How many of their analysts have seen economic cycles ?
- Have they ever lent a Rupee sorry $?
- Will the treatment be same for all those countries missing fiscal
targets because of COVID-19 – stimulus packages?
It is in this context that one is celebrating the positive market & muted press reactions to the rating downgrade. It strengthens the argument in favour of a larger hand out and ‘fiscal arithmetic concerns’ giving way for fiscal measures to revive aggregate demand. When that happens, foreign investors however hardnosed they are and concerned about ratings will also continue to invest in India, the largest consumer market with aggregate demand revived and purchasing power restored.
Where else they can go?
