Exclusive | FM Sitharaman on rating agencies: 'Hope they do their job'

Finance Minister Nirmala Sitharaman said on Friday that credit rating agencies should take note of India's transparent fiscal glide path.

Speaking in an exclusive interview with Rahul Joshi, Editor-in-Chief, Network18, Sitharaman said, "I would think that they do their job. But periodically, it's our business also to bring it to their notice that the economy, particularly an emerging market economy like India, despite the odds, is doing a lot of systemic reforms, which, as you are seeing, is bearing the results now."

Sitharaman, in the interim budget on Thursday, February 1, estimated the fiscal deficit in the next financial year at 5.1% of GDP, lower than 5.8% in the current fiscal year.

"We continue on the path of fiscal consolidation, as announced in my Budget speech for 2021–22, to reduce the fiscal deficit below 4.5% by 2025–26," Sitharaman said.

A day earlier, former Chief Economic Advisor (CEA) KV Subramanian and Moody's Investors Service were involved in a war of words. Subramanian said it would be a travesty if rating agencies don't acknowledge India's transparent fiscal consolidation path, while also adding that "India has never defaulted" and that "our willingness to repay debt is the gold standard".

Global rating agency Moody's Investors Service's Christian de Guzman, however, responded by saying that "a lack of a default history is not a marker of a high credit rating".

TV Somanathan, Secretary of Finance, expressed a lack of expectation and confidence in the fairness of rating agencies. He said that these assessments hold little significance for the government, as rating agencies are perceived to operate independently of fairness considerations.

Moody's last August affirmed a 'Baa3' rating on India with a stable outlook. A higher rating implies lower economic risk, allowing a country to borrow at cheaper rates.