Why does resilient India still get a close-to-junk credit rating from agencies?
- Swaminathan S Anklesaria Aiyar
- TNNUpdated: Apr 26, 2025, 19:48 IST IST
Despite India's rapid economic growth and resilience, global credit rating agencies remain cautious, owing to concerns about high fiscal deficits and debt levels. Some economists express pessimism, but India's strengths suggest continued resilience
For several years, the World Bank and International Monetary Fund have praised India for becoming the fastest-growing major economy. Its resilience during Covid helped it escape the travails that hit most developing countries. And yet, global credit rating agencies — Moody’s, S&P, and Fitch — still rate India’s sovereign bonds as just one grade above what is labelled ‘junk’ in the bond market. ‘Junk’ indicates a significant chance of default. The rating agencies feel that, despite its recent feats, India could go bust in a future crisis.
Chief economic advisor V Anantha Nageswaran and his colleague Rajiv Mishra penned an essay in 2023, accusing the rating agencies of opaque, biased methodologies. Developing countries have accounted for over 95% of downgrades in recent years despite experiencing milder contractions than some advanced nations.
Chief economic advisor V Anantha Nageswaran and his colleague Rajiv Mishra penned an essay in 2023, accusing the rating agencies of opaque, biased methodologies. Developing countries have accounted for over 95% of downgrades in recent years despite experiencing milder contractions than some advanced nations.