Page 128 - ES 2020-21_Volume-1-2 [28-01-21]

Does India’s Sovereign Credit Rating reflect its fundamentals No! 111

no or weak correlation with macroeconomic indicators. Figure 36 shows India’s GDP Growth
(at constant 2011-12 prices) in relation to sovereign credit rating changes during 1998-2020.
There is no clear pattern between changes in GDP growth and sovereign credit rating changes.

Figure 36: India’s GDP Growth (2011-12 Constant Prices)
and Sovereign Credit Rating Changes

10% 7.9% 7.9% 8.1% 7.0%
GDP Growth (2011-12 Constant prices) 6% 6.2% 4.8% 3.8%
8%

4%

2%

0%
1998-99 1999-00 2000-01 2001-02 2002-03 2003-04 2004-05 2005-06 2006-07 2007-08 2008-09 2009-10 2010-11 2011-12 2012-13 2013-14 2014-15 2015-16 2016-17 2017-18 2018-19 2019-20

Note: Red signifies year of rating downgrade. Green signifies year of rating upgrade.
Source: MoSPI and RBI

Figure 37: India’s Fiscal Deficit (as per cent of GDP)
and Sovereign Credit Rating Changes

12%

10% 9% 10% 9% 8%
Fiscal Deficit (% of GDP) 6% 7% 5% 6%
8%

4%
2%
0%
1998-99 1999-00 2000-01 2001-02 2002-03 2003-04 2004-05 2005-06 2006-07 2007-08 2008-09 2009-10 2010-11 2011-12 2012-13 2013-14 2014-15 2015-16 2016-17 2017-18 2018-19 2019-20

Note: Red signifies year of rating downgrade. Green signifies year of rating upgrade.
Source: RBI

3.47 Figure 37 shows India’s Fiscal Deficit (as per cent of GDP) for Central and State
Governments in relation to sovereign credit ratings changes during 1998-2020. All sovereign
credit ratings upgrades occurred in years that witnessed lower fiscal deficit as compared to the
previous year.

3.48 Figure 38 shows India’s general government debt (as per cent of GDP) in relation to
sovereign credit ratings changes during 1998-2019. Most sovereign credit rating upgrades
occurred in years that witnessed higher or similar level of general government debt (as per cent
of GDP) as the previous year.