Downgrading Not To Hit Fdi Flow: Bjp

The BJP holds that the downgrading of India's foreign currency rating is unlikely to affect the flow of foreign investment to India.This is because the current rating by Duff and Phelps follows the pattern set by Standard and Poor and Moody.

The credit ratings by these foreign agencies have lost their credibility as they appear to be a systemic attempt by the western powers to browbeat India into signing the CTBT, BJP executive member and member of the party's economic cell, Jagdish Shettigar, told the "Business Standard" yesterday.

These agencies have downgraded India after the recent nuclear tests, he pointed out. These ratings are the blackmailing tactics by external forces. "They want to teach us a lesson for the nuclear tests," he said.

Another BJP leader pointed out the some BJP leaders have been informally told by agents of international rating agencies that India's problems would be over after it signs the test ban treaty.

These steps were aimed at shaking domestic investors' confidence on the economy and to force them to act as pressure group against government, shettigar held. These investors would be then asked to lobby with the government to ask it to sign the CTBT, he added.

Shettigar explained that the downgrading, at the most, would make private borrowings from international financial institutions costly.

These companies would now have to pay four per cent more interest than before, he said.

In the long run, this would make production costly and prove detrimental either to the investors or the consumers. Either the prices would go up or the profit margins of the producers would go down, Shettigar held.

He refuted Duff and Phelps' charges that the government's ability to take undertake critical reforms and privatisation would be constrained because of coalition politics. The government has taken tough measures despite coalition government's compulsions, he said, pointing out that the government recently decided to allow 74 per cent private equity even in strategic areas.

The government's decision to raise the passenger fares instead of the freight charges for railways was yet another example that it could act tough, he held.

This was the first time that a government decided not to cross subsidise passenger fare through raising the freight tariffs.