Page 113 - ES 2020-21_Volume-1-2 [28-01-21]

96 Economic Survey 2020-21 Volume 1

credit ratings and short-term external debt (as per cent of reserves) across countries with partial
capital account convertibility in India’s sovereign credit ratings cohort. India continues to be
a negative outlier and is currently rated much below expectation for its level of short-term
external debt (as per cent of reserves).

3.18 A negative correlation is observed between sovereign credit ratings and reserves adequacy
ratio (Figure 16) across India’s sovereign credit ratings cohort. India is a negative outlier and is
rated much below expectation for its level of reserves adequacy ratio.

HAVE INDIA’S SOVEREIGN CREDIT RATINGS REFLECTED ITS
FUNDAMENTALS IN THE PAST? NO!

3.19 India’s negative outlier status w.r.t. its sovereign credit ratings vis-à-vis performance on
several parameters remains true not only now but also during the last two decades. India has
consistently been rated below expectation as compared to its performance on various parameters
during the period 2000-20. Figure 17 shows that within its sovereign credit ratings cohort, India
has consistently been rated much below expectation for its level of GDP growth rate during the
period 2000-20.

3.20 Figure 18 shows that during 2000-20, India has consistently been a negative outlier,
rated much below expectation for its level of inflation within its sovereign credit ratings
cohort.

Figure 17: Sovereign Credit Ratings Figure 18: Sovereign Credit
and GDP Growth Annual (Per cent) Ratings and CPI Inflation

7 7

6 5 6 5
Average rating (1=BBB−/Baa3 to 6=A+/A1) Ordinal scale 4 3 Average rating (1=BBB−/Baa3 to 6=A+/A1) Ordinal scale 4 3

2

2015 2 1 2020 2015
1 2010
2020 2005 2010 2005 2000
0
0
2000
−4 0 4 8 12
GDP growth (%, YoY) 0 10 20
CPI Inflation (%, YoY)
Source: Bloomberg, Datastream and IMF Source: Bloomberg, Datastream and IMF
Note: Red shows India's rating during 2000-20 Note: Red shows India's rating during 2000-20
3.21 Figure 19 shows that within its sovereign credit ratings cohort, India has been a negative
outlier and has consistently been rated much below expectation for its level of general government
gross debt (per cent of GDP) during the period 2000-20.