Rating index gets a push

CRIS:Precise mathematical formula for CRIS is confidential

The writer of economic survey 2011-12, chief economic advisor Kaushik Basu, chose not to disclose the mathematical formula for the Comparative Rating Index for Sovereigns (CRIS) in the document but hinted this finance ministry exercise initiated by him would be taken forward.

“The plan is to use the formula and give out CRIS scores of nations at regular intervals in order to help investors make better decisions and, in turn, for nations to evaluate themselves more effectively,” said the Survey.

It said the precise mathematical formula for the CRIS and, hence, the paper (‘The relativity of sovereigns: a new index of sovereign credit ratings and an analysis of how nations fared over the last six years’) was confidential but its broad idea was easy to explain.

“It should first be clarified that its computation is based on nothing apart from standard ratings data and data on the GDPs of different nations ,in order to determine the importance or weights of different nations,” said the Survey.

Researchers from the economic division of the finance ministry, led by Basu, settled on Moody’s foreign currency credit ratings and the International Monetary Fund’s GDP statistics, with no purchasing power parity (PPP) correction.

Each nation’s CRIS is constructed using these two sets of numbers.

CRIS is an effort to go beyond the standard credit ratings and address the needs of investors to know how a country is doing in comparative terms.

One nation’s improvement in CRIS is invariably accompanied by worsening of the CRIS for some other nation or nations.

According to the CRIS chart of 101 nations, the countries with the highest increases from 2007 to 2012 are Uruguay (25.1 per cent), Bolivia (24.7 per cent), Indonesia (20.75 per cent), Philippines (16.8 per cent), Peru (15.6 per cent), and Brazil (14.4 per cent). India’s CRIS has risen steadily through this six-year stretch.