{"id":110908,"date":"2026-07-02T10:48:47","date_gmt":"2026-07-02T05:18:47","guid":{"rendered":"https:\/\/vajiramandravi.com\/current-affairs\/?p=110908"},"modified":"2026-07-02T10:48:47","modified_gmt":"2026-07-02T05:18:47","slug":"sovereign-credit-ratings","status":"publish","type":"post","link":"https:\/\/vajiramandravi.com\/current-affairs\/sovereign-credit-ratings\/","title":{"rendered":"Sovereign Credit Ratings: India&#8217;s Grievances with Global Credit Rating Agencies Explained"},"content":{"rendered":"<h2><b>Sovereign Credit Ratings Latest News<\/b><\/h2>\n<ul>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">Speaking at a business conference in London, Commerce Minister Piyush Goyal questioned the methodologies of <\/span><b>sovereign rating agencies<\/b><span style=\"font-weight: 400;\">, saying they have been &#8220;<\/span><b>unfair to India<\/b><span style=\"font-weight: 400;\">.&#8221;\u00a0<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">He contrasted this with praise for one agency \u2014 CareEdge Ratings \u2014 for being &#8220;objective.&#8221; This is not the first time India has raised this concern, and it has revived the debate over how the country is rated.<\/span><\/li>\n<\/ul>\n<h2><b>What Do Rating Agencies Measure<\/b><\/h2>\n<ul>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">India is rated by seven international sovereign credit rating agencies: S&amp;P, Moody&#8217;s, Morningstar DBRS, Fitch, the Japanese Credit Rating Agency (JCRA), Rating and Investment Information (R&amp;I), and CareEdge Ratings.\u00a0<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">The three most widely accepted globally are S&amp;P, Fitch, and Moody&#8217;s.<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">Their core job is to <\/span><b>measure an entity&#8217;s ability and willingness to repay its debt<\/b><span style=\"font-weight: 400;\">. The entity can be a company, a municipal corporation, a state, or \u2014 in the case of sovereign ratings \u2014 a national government.<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><b>How the scale works<\/b><span style=\"font-weight: 400;\">: Ratings use an alphabet scale. Fitch and S&amp;P use AAA as the highest (Moody&#8217;s uses Aaa), descending through AA+, AA, AA-, A+, A, A-, then into the &#8216;B&#8217; ratings, down to <\/span><b>D<\/b><span style=\"font-weight: 400;\">, which means the <\/span><b>entity is in default<\/b><span style=\"font-weight: 400;\">.<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><b>Why ratings matter:<\/b><span style=\"font-weight: 400;\"> They determine the interest rate at which an entity can borrow. A AAA rating implies no default risk and the lowest borrowing costs. The lower the rating, the higher the perceived risk \u2014 and the higher the interest rate demanded to offset it.<\/span><\/li>\n<\/ul>\n<h2><b>The Key Distinction: Ability vs. Willingness to Repay<\/b><\/h2>\n<ul>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">This is the conceptual heart of the dispute. The two metrics are very different:<\/span>\n<ul>\n<li style=\"font-weight: 400;\" aria-level=\"2\"><span style=\"font-weight: 400;\">Ability to repay is largely quantitative \u2014 backed by hard numbers that show whether a country can service its debt.<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"2\"><span style=\"font-weight: 400;\">Willingness to repay is largely qualitative \u2014 it relies on opinion and judgement rather than hard data.<\/span><\/li>\n<\/ul>\n<\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">This distinction underpins India&#8217;s entire grievance.<\/span><\/li>\n<\/ul>\n<h2><b>How India Has Been Rated So Far<\/b><\/h2>\n<ul>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">For years, India has been rated at the lowest rung of investment grade \u2014 just a grade or two above &#8220;junk&#8221; status (the point at which lenders stop lending for fear of default).\u00a0<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">Strikingly, these ratings went unchanged for over a decade, and in some cases nearly two decades.<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">Recent upgrades have come, but slowly:<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">Even after these upgrades, India remains <\/span><b>only just above junk grade<\/b><span style=\"font-weight: 400;\">.<\/span><\/li>\n<\/ul>\n<h2><b>India&#8217;s Core Objections<\/b><\/h2>\n<ul>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">Despite the upgrades, the government argues the ratings do not reflect reality. The agencies &#8220;haven&#8217;t recognised the India growth story, the strong India fundamentals and the sovereign capabilities.&#8221;\u00a0<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">The issue has even featured in official documents. The <\/span><b>Economic Survey 2020-21<\/b><span style=\"font-weight: 400;\"> devoted an entire chapter to it. Its key arguments:<\/span>\n<ul>\n<li style=\"font-weight: 400;\" aria-level=\"2\"><span style=\"font-weight: 400;\">It was the first time the <\/span><b>world&#8217;s fifth-largest economy<\/b><span style=\"font-weight: 400;\"> had been assigned such a low rating.<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"2\"><span style=\"font-weight: 400;\">India&#8217;s <\/span><b>macroeconomic fundamentals<\/b><span style=\"font-weight: 400;\"> are strong \u2014 more than enough to demonstrate its ability to repay.<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"2\"><span style=\"font-weight: 400;\">On willingness, India has <\/span><b>never defaulted<\/b><span style=\"font-weight: 400;\"> on its sovereign debt despite several crises \u2014 which should be strong proof of its willingness to pay.<\/span><\/li>\n<\/ul>\n<\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><b>The central allegation<\/b><span style=\"font-weight: 400;\">: Global agencies rely too heavily on <\/span><b>qualitative metrics<\/b><span style=\"font-weight: 400;\"> rather than quantitative ones. These qualitative judgements are often based on the opinions of a small group of experts, making them subjective and prone to skewing the overall rating.\u00a0<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">Meanwhile, quantitative metrics \u2014 where India performs relatively well \u2014 are given comparatively lower weightage.<\/span><\/li>\n<\/ul>\n<h2><b>Why CareEdge Ratings Is Favoured<\/b><\/h2>\n<ul>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">CareEdge stands apart for two reasons:<\/span>\n<ul>\n<li style=\"font-weight: 400;\" aria-level=\"2\"><span style=\"font-weight: 400;\">It is the first sovereign rating agency headquartered in India, so the perception is that it can better capture the ground realities of India&#8217;s economy.<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"2\"><span style=\"font-weight: 400;\">More importantly, its stated methodology gives primary importance to quantitative factors \u2014 precisely the metrics on which India scores well, and precisely the fix India has been demanding of the global agencies.<\/span><\/li>\n<\/ul>\n<\/li>\n<\/ul>\n<h2><b>Conclusion<\/b><\/h2>\n<ul>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">India&#8217;s dispute with global rating agencies boils down to a single argument: that ratings lean too much on subjective, opinion-based qualitative judgements and too little on hard quantitative data, where India performs well.\u00a0<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">With strong fundamentals, a clean record of never defaulting, and status as the world&#8217;s fifth-largest economy, New Delhi feels its persistent ranking just above junk grade is unjustified.\u00a0<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">The recent upgrades by S&amp;P, Moody&#8217;s, R&amp;I and others suggest some movement, but the deeper concern remains \u2014 that the methodology itself needs reform.\u00a0<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">The government&#8217;s endorsement of the India-headquartered, quantitatively-driven CareEdge signals the kind of approach it believes would rate India more fairly.<\/span><\/li>\n<\/ul>\n<p><b>Source:<\/b> <strong><a href=\"https:\/\/www.thehindu.com\/business\/what-are-indias-problems-with-most-credit-ratings-agencies\/article71164790.ece\" target=\"_blank\" rel=\"nofollow noopener\">TH<\/a> | <a href=\"https:\/\/indianexpress.com\/article\/explained\/explained-economics\/credit-ratings-the-govt-view-9079612\/\" target=\"_blank\" rel=\"nofollow noopener\">IE<\/a><\/strong><\/p>\n","protected":false},"excerpt":{"rendered":"<p>Sovereign Credit Ratings remain a point of contention as India questions global rating methodologies, citing strong fundamentals and an impeccable sovereign repayment record.<\/p>\n","protected":false},"author":18,"featured_media":110920,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"footnotes":""},"categories":[18],"tags":[60,8439,22,59],"class_list":{"0":"post-110908","1":"post","2":"type-post","3":"status-publish","4":"format-standard","5":"has-post-thumbnail","7":"category-upsc-mains-current-affairs","8":"tag-mains-articles","9":"tag-sovereign-credit-ratings","10":"tag-upsc-current-affairs","11":"tag-upsc-mains-current-affairs-tag","12":"no-featured-image-padding"},"acf":[],"_links":{"self":[{"href":"https:\/\/vajiramandravi.com\/current-affairs\/wp-json\/wp\/v2\/posts\/110908","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/vajiramandravi.com\/current-affairs\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/vajiramandravi.com\/current-affairs\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/vajiramandravi.com\/current-affairs\/wp-json\/wp\/v2\/users\/18"}],"replies":[{"embeddable":true,"href":"https:\/\/vajiramandravi.com\/current-affairs\/wp-json\/wp\/v2\/comments?post=110908"}],"version-history":[{"count":4,"href":"https:\/\/vajiramandravi.com\/current-affairs\/wp-json\/wp\/v2\/posts\/110908\/revisions"}],"predecessor-version":[{"id":110922,"href":"https:\/\/vajiramandravi.com\/current-affairs\/wp-json\/wp\/v2\/posts\/110908\/revisions\/110922"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/vajiramandravi.com\/current-affairs\/wp-json\/wp\/v2\/media\/110920"}],"wp:attachment":[{"href":"https:\/\/vajiramandravi.com\/current-affairs\/wp-json\/wp\/v2\/media?parent=110908"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/vajiramandravi.com\/current-affairs\/wp-json\/wp\/v2\/categories?post=110908"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/vajiramandravi.com\/current-affairs\/wp-json\/wp\/v2\/tags?post=110908"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}