Govt., industry ignore downgrade

By Our Special Correspondent

NEW DELHI, AUG. 8. The Finance Minister, Mr. Yashwant Sinha, has dismissed the downgrading of India's sovereign credit rating outlook by Standard and Poor's saying that the stability of the markets had proved the global rating agency wrong.

The stock markets too did not take the downgrade seriously and there was no major adverse impact of the revised ratings either at the bourses or at the forex market.

The Finance Minister emphasised that the stability of the market was the biggest commentary since all the parameters were stable. All projections of crumbling rupee and bond markets have not happened, he added.Mr. Sinha was also critical of the haste with which the rating agency had reacted since only the first quarter of the current fiscal had elapsed and three quarters were still to go.

The corporate sector also chipped in against the rating agency. The Confederation of Indian Industry (CII) said in a statement that the rating by S&P's was based on an incomplete picture of the Indian economy as the agency had ignored many positive aspects of the Indian economy while concentrating on the rising fiscal deficit and lack of privatisation for the downgrade.The CII also pointed out that in the context of the current global economic slowdown, a lower gross domestic product (GDP) growth of 5.2 per cent still put the Indian economy as the second fastest growing in Asia, and among the top 10 fastest growing economies in the world.

Second, the Indian economy was in a comfortable position on the external front with foreign exchange reserves of around $43 billion and a debt service coverage ratio of around 16 per cent. Also, unlike Southeast Asia in 1997-98, India had very little short term dollar denominated debt. Thus, there was no fear of a sustained pressure on the exchange rate because of bad debts, the CII has said.

The CII has also expressed the view that the S&P's downgrade would not any medium or long term negative impact on the rupee, or materially alter the cost of foreign borrowing. However, given the present foreign investment scenario, there may be some short sentimental reactions.

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Section  : Business
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