Competitive pressures

It is well known that the collapse of Lehman Brothers in 2008 and the European debt crisis dented the credibility of rating agencies that had accorded much of the dodgy debt they accumulated top ratings. But those crises also turned the business more competitive. This was well in evidence on Wednesday, April 25, when Standard & Poor's cut its long-term outlook to "negative". Within hours of S&P's somewhat show-stopper announcement, Moody's Analytics issued a press release titled "India Outlook: Still Underachieving", which broadly reiterated S&P's opinions. Interestingly, just five days before, Moody's Investors Services had announced its outlook on Indian government bonds as "stable" and explained why (a strong savings and investment rate would sustain future growth). Wednesday's release, however, came from Moody's Analytics and it careful to specify that it was independent and did not reflect the opinions of Moody's Investors Services, the credit ratings agency, which is also a subsidiary of Moody's Corporation. So whose advice investors should heed is anybody's guess.