Sunday, November 19, 2017

An article in a web magazine called  COUNTERVIEW today has an article that says the higher Sovereign rating given to India by the international credit rating agency Moody’s and the earlier good reports by the World Bank and IMF are as a result of Modi's top Gujarat babus in PMO lobbying  with Washington institutes, quoting an un-namd “ Insider”. the ‘Counterview’ article is yet more proof that left-wingers who struggle with economics and basic analytics have to now rely on low-grade gossips and that facts are never an obstacle when they still try to advance a certain “required” narrative.

A credit rating is a measure of the credit worthiness of a borrowing entity, whether a sovereign or a company. It is a tag that tells a potential lender how likely it is that the borrower will default on payments. I am no financial expert but I suppose India’s credit rating going up by one notch to Baa2 from the earlier Baa3, simply indicates that the rating agency believes India’s credit worthiness has improved since it last conducted a review. (China’s rating was also downgraded earlier this year to A1 from Aa3, citing risks from soaring debts. Russia is at Ba1 among BRICS countries) It will mean a lowering of the risk premium that India will have to pay; and that means India can now command a lower interest rate for the debt that it issues. If you had watched the investment climate in the country during the last year, you would have seen FIIs making more investments in debts than equities thanks to the better interest rates following lower inflation. This trend will possibly be reversed now. That is no earth-shaking news, for the Opposition politicians to cry foul! When people are upset about someone says something nice about our country, it shows up the protestor’s complete alienation!
It is known that international monetary and financial systems like the World Bank and the IMF routinely monitor the economic and financial policies of member countries. This activity is known as surveillance and facilitates international co-operation. The responsibilities of IMF and World Bank had changed for many years from those of guardian to those of overseer of members’ policies. Their reports and the ratings help capital markets and credit risk management professionals worldwide to respond to an evolving global marketplace with confidence. There may be lobbying of sorts to project the policy perspectives of the countries to encourage better understanding by their Boards of Directors so that the image of the countries is not tarnished if not enhance. Indian (Modi) government too has the right to be heard with respect and minus the usual intellectual condescension. The writer thinks that some top bureaucrats from the Gujarat cadre, currently in the Prime Minister's Office (PMO) must have lobbied with World Bank, Moody's and Pew, for ensuring a sharp image makeover of Modi ahead of the Gujarat elections because last year these bodies didn’t show India under Modi in good light is being irresponsible to the level of an unthinking rage and hatred for the Modi Government. Has the author heard Keynes’ comment “When facts change I change my opinions. What do you do?”
“An insider in Gujarat government told me” seems to be the ultimate political kryptonite this author could produce! It will be another damp squib, I assure you! Since the run-up to the general election of 2014, we are witnessing a growing gulf between what the electorate thinks and how a small intellectual elite in India as well as abroad perceive happenings in India! We saw how little the coloured reports by a small coterie of agenda-driven journalists influenced the outcome in UP or in the various municipal and local bodies elections in different States! I will not be surprised if the outcome of the Himachal and Gujarat elections aren’t different! Perhaps it is that fear which makes some Opposition leaders and journalists make a hue and cry about Moody’s higher Sovereign rating for India. Next in line will be better ratings for Indian Companies. Moody's have revised outlook for three Indian public sector banks to stable from negative, and appreciated the capital infusion plan for the PSU banks is a significant credit positive for them public Moody's. Outlook for Indian banking system was stable in August 2017.
I think the higher rating puts Modi Government in a “watched-pot situation” for making calculated and calibrated steps forward to implement fiscal, financial, land and labour market reforms in the days ahead. Moody’s one-notch rating upgrade is a bet that India will contain public debt. The upgrade is a recognition of the fact that India continues to follow a path of fiscal prudence. Moody’s acknowledge that many a Modi reform remain at the design phase, while believing that those implemented to date will advance the government’s objective of improving the business climate, enhancing productivity, stimulating foreign and domestic investment, and ultimately fostering strong and sustainable growth. Government alone cannot achieve much. The people, including those in the Opposition camps too have a role in development efforts of the regime. It is here that the expression “power paradox” comes to my mind: a situation where political dominance can, paradoxically, reduce the ruling party’s actual power to shape and guide society and economy! It is sad because here is a PM who inaugurated a great unburdening on issues of religious and caste differences and regional politics with an agenda for development of all, treated as an enemy of the people! There appears to be a new thought process and propagation of it in the Opposition ranks in which reason dies, ideas go unchallenged and become axiomatic and eventually beliefs!
The sure sign of the death of reason and even discretion and intelligence is the flood of obscenities flowing into the Facebook page of the hapless Australian Cricketer Tom Moody, for helping Indian Prime Minister Narendra Modi with a higher credit rating for India!

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