 "Arvind Subramanian")
Chief Economic Advisor (CEA) Arvind Subramanian said on Thursday that the proposed BRICS (Brazil, Russia, India, China and South Africa) credit ratings agency will help India bypass the problem of what it sees as unfair long-term sovereign credit ratings by Western agencies like Standard & Poor’s, Fitch and Moody’s.
Subramanian was speaking on Facebook Live, on the finance ministry’s official page, wherein he took questions on the 2016-17 economic survey. To a question on how India could work past the impression that inspite of major reforms, the ratings agencies don’t upgrade their ratings, he said: “You can ignore them. Countries do what they have to do and what is good for their own people, in terms of spending and reforms.” “Another way of looking at it is that these agencies are all based in advanced economies. As the Prime Minister (Narendra Modi) has suggested, BRICS countries have proposed to create our own ratings agency. There have been discussions and such an agency is under consideration.” The five-country grouping had at their previous meeting in Goa last October decided to set up an independent ratings agency.
Subramanian, and many other senior officials in the central government, have recently been vocal on what they see as unfair assessment and methodology of the big three ratings agencies when it comes to India.
Subramanian spoke on a number of issues he’d written on in the latest economic survey. These included the concept of a Universal Basic Income (UBI) and his proposal of a Public Sector Asset Rehabilitation Agency (PARA).
On whether PARA was similar to the Troubled Asset Relief Programme (TARP) that the United States federal government set up in the aftermath of the Lehman Brothers’ bankruptcy in 2008, the CEA said: “Conceptually, TARP is similar to PARA. You buy bad loans from banks and companies. You allow them to restart their operations without those bad assets.”
“But, in design, PARA could be rather different. TARP wholly belonged to the US government. There are many ways you could think of setting up PARA.” On UBI, he said it could cost the government four to five per cent of gross domestic product set up. So, a lot of consideration had to go into it. On how world events last year, including the British vote to leave the European Union and Donald Trump’s election as US President, would affect global economic trends, he said: “What happened in 2016 have fundamentally called into question the commitment of some advanced economies to keep their markets open… Globalisation has been one of the biggest forces of reducing poverty in the world.”
