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D. Murali

AS usual, S&P has bad news for India. That everything is falling apart and `outlook', therefore, is `negative'. If there is one thing you can be positive about, it is the regularity with which the global rating agency Standard & Poor's churns up junk mail for us. This is nothing new; only they've confirmed what they had said earlier about our foreign currency rating being `BB' which is actually spelt `j-u-n-k' in S&P dictionary. It seems to matter little for the Poor guys that our forex reserves are swelling beyond $70 billion and GDP growth is climbing faster than a waxing moon. And there is a lot of hate mail rushing in:

Who is the villain?

If you see the Web site of the agency, there are two names you can note down, viz., Takahira Ogawa and John Chambers. If you ask them, they would say, the real villain is among us. "India's ratings remain constrained by high public debt and serious fiscal inflexibility," says Ogawa, S&P's Director of Sovereign Ratings in Asia-Pacific. "The consolidated debt of the Central and State Governments is expected to hover around 80 per cent of GDP this year, and interest payments alone are likely to consume nearly half of Central Government revenue."

I thought they were angry sometime back when privatisation halted.

That was in September, when they trimmed the rating to junk status after opposition within the coalition put brakes on the privatisation process. Much water has flown below the bridge since then, but they are still upset that our "political compulsions are likely to prevent significant fiscal adjustment through reduced government spending, placing the burden of change on the revenue side."

How to use the word `trajectory' in a sentence of my own?

It means aerospace path of flying object, that is, the path a projectile makes through space under the action of given forces such as thrust, wind, and gravity. If Saddam throws a Scud and you track it on the CNN, you can see only blips but can imagine how the missile travelled in air, before vanishing at the edge of your TV screen. Many legislators learn trajectory early on, because it comes handy when throwing mikes at their opponents in the House. The way S&P uses the word can give you a clue: "The negative outlook on the ratings reflects concerns that the long-term trajectory of the government's debt burden may continue to worsen even as the economy grows at about five per cent per year and foreign exchange reserves remain high." Still clueless? Think of something like how a minister would respond: "We have constituted a judicial commission to probe the trajectory tragedy."

What does the new rating mean for us?

For some, the agency's views "do not mean anything." The Chairman of Bank of India, Mr K.V. Krishnamoorthy, has commented, for instance, that the rating agency's views do not matter much. "I can only say the standard of the rating agency is poor." There are the others who read S&P news as if it is their own kid's progress report. The best thing to realise is that one has little control over both.

Do they have no nice things to say about us?

In a few places, they do sound positive. Such as the recent law to strengthen the stock market regulator, bolstering competition by amending archaic anti-monopoly laws, renewed commitment to privatisation, the new securitisation regime to protect creditor rights, and so on.

Has the doc given any prescription?

A long list, in fact. The antibiotic is `effective and timely implementation of tax reform', vitamin is `to move toward a value-added tax combining existing State and Central taxes', and antacid is `stronger political commitment'. The next medical check is slated for Budget 2003-2004, which will indicate, "whether the government is able to capitalise on the recent acceleration in reform by undertaking meaningful tax reform and other steps to address the weaknesses in India's public finances."

So, get well soon.

hindubusinessline@hotmail.com

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