Page 116 - ES 2020-21_Volume-1-2 [28-01-21]
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Does India’s Sovereign Credit Rating reflect its fundamentals No! 99
3.28 During 2000-20, India has consistently been rated below expectation for its level of control
of corruption within its sovereign credit ratings cohort and been a negative outlier (Figure 26).
Figure 27: Sovereign Credit Ratings and Ease of Doing Business
7
6 5
Average rating (1=BBB−/Baa3 to 6=A+/A1) Ordinal scale 4 3
2
2020
1 2010
0
50 60 70 80
Ease of Doing Business (Score)
Source: Bloomberg, Datastream and World Bank
Note: Red shows India's rating during 2010-20
3.29 Figure 27 shows that India has consistently been a negative outlier, rated below expectation
for its level of ease of doing business within its sovereign credit ratings cohort during 2010-20.
DOES INDIA’S SOVEREIGN CREDIT RATING REFLECT ITS
WILLINGNESS AND ABILITY TO PAY? NO!
3.30 Credit ratings map the probability of default and therefore reflect the willingness and ability
of borrower to meet its obligations. India’s willingness to pay is unquestionably demonstrated
through its zero sovereign default history. Yet as Figure 28 shows, within India’s sovereign
credit ratings cohort, India is rated much below expectation for its number of sovereign defaults
since 1990 (which is zero for India), making it a negative outlier.
Figure 28: Sovereign Credit Ratings Figure 29: Sovereign Credit Ratings and
and Number of Sovereign Defaults Number of Years Since Last Sovereign Default
6 6
5 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
2
1 India India
1
0 1 2 3 4 0 10 20 30
Number of defaults since 1990 No of years since default
Source: Bloomberg; Datastream; S&P; Source: Bloomberg; Datastream; S&P;
Reinhart and Rogoff (2009) Reinhart and Rogoff (2009)
