India lashes out at S&P, says economy in better shape
New Delhi/Kochi: The government and a section of the industry Tuesday lashed out at Standard and Poor's for its assessment of the Indian economy and accused the global rating agency of not being "transparent" besides alleging that its comments "smacked of politics".
While Finance Minister Pranab Mukherjee said the government has taken note of S&P's apprehensions and is sorting out the economic problems, Corporate Affairs Minister Veerappa Moily alleged the rating agency's approach "smacked of politics".
"Of course, they have studied from different angle and from their point of view they have expressed their apprehensions. We take note of it. But as I mentioned we shall have to sort our own problems and for that we are taking necessary steps," Mukherjee said.
Secretary in Department of Economic Affairs R Gopalan said the government is not getting "transparent answers" from S&P on matters related to ratings.
Industry body Assocham's President Rajkumar Dhoot, who is also an MP, said that the S&P's comments on political and government leadership were "no more than drawing room talk and that too in a loose fit".
Citing division of roles between UPA chairperson Sonia Gandhi and Prime Minister Manmohan Singh, Standard and Poor's had yesterday threatened to downgrade India's credit rating. It said India could be the first BRIC nation to falter and fall below investment grade in the ratings.
"How can they pass reflection on political party and political leadership?" Moily asked. The Minister further said that he did not think any credit rating agency in the world had an approach of this type which "smacks" of politics.
S&P should realise its mistake and rectify it, he added.
"You cannot judge us on a few parameters. We think we are in a much better condition than they think we can be," Gopalan said.
Moily also wondered how a credit rating agency can qualify the Prime Minister as unelected leader. "Prime minister is an elected member of the Rajya Sabha and has the full support of about 350 members, allies and supporting parties. I do not think this kind of support was available for any Prime Minister," he said.
Mukherjee had on Monday rejected S&P's contention and said the economy will turn around this fiscal.
Noting that S&P should go by economic criteria, Moily said, "S&P cannot speak like this. The Congress and government have been working in harmony. Since 2004, they have been working very well," he said, adding that there were differences between political parties and the government during the BJP-led NDA reign.
The UPA-II government is fully supported by the Congress, he said. The Minister pointed out that the party President (Sonia Gandhi) chose to sit back and gave the Prime Ministership to Singh when she herself could have occupied the top post thrice.
Singh is "a great economist and statesman" and since 2009 he has been leading the government very well, he said.
The Minister further noted that fundamentals are strong and India's FDI is better than China and the country has a strong economy and strong government.
According to Gopalan, the Finance Ministry had told S&P representatives that their process of rating was "not transparent".
"We had also asked them to share with us their findings before the ratings are assigned so that we can explain our point of view. We don't seem to be getting transparent answers," he said.
Earlier in April, S&P had cut its outlook on the country's sovereign rating of 'BBB-' to negative from stable.
After meeting the Prime Minister, Dhoot said, "Let us not get rattled by these rating outlook and the threats. The Indian economy has an inherent strength and we never had any record of default in any of our international obligations".
Dhoot said the Standard and Poor's own track record is also not flawless. "It gave excellent ratings to Lehman Brothers last year and what happened in three months time Lehman Brothers disappeared. On August 11, 2011, S&P downgraded American economy. What happened? In a quarter, American GDP growth reached 3 percent from 1.8 percent."
He said let India and other emerging countries not become "whipping boys" for these global agencies. They do more harm than good to us in terms of building a worldwide negative perception, he added.