Standard: Poor

S&P has nothing new to say,but surely UPA does not need the agency to spook it into action

S&P has nothing new to say,but surely UPA does not need the agency to spook it into action

Standard & Poors report speculating on a second downgrade of Indias credit rating to junk level contains neither new information nor insight,and S&P admits that nothing has changed since April when it downgraded India to BBB-. This document,released when India is grappling with multiple uncertainties,reads like a self-fulfilling prophecy. It spooked the markets and may hamper inflows in the short term though the fundamentals remain unchanged,the slowdown owes to political rather than economic factors and the report itself admits that India is well prepared to

weather storms. Finance Minister Pranab Mukherjee has dismissed the report,but its implicit message needs to be taken seriously. Industrialists have chorused their fears about faltering reforms and the latest Index of Industrial Production data,which shows a standstill with a growth rate of 0.1 per cent,has triggered a clamour for immediate intervention by the central bank.

S&P raises questions without definitive answers and loses its way in a wilderness of pros and cons. But it does indicate that in the worst-case scenario unlikely but not impossible Indias creditworthiness could plummet. A section of the report,titled Divided leadership at the Centre may be the biggest hurdle,reads like it was ghostwritten by Sushma Swaraj and L.K. Advani. S&P ascribes the slowdown to the division of roles between Sonia Gandhi and Manmohan Singh. It states that Singh does not appear to have the political backing that he had enjoyed as P.V. Narasimha Raos finance minister and that the Congress is deeply divided on reforms,with leaders seeking to protect discretionary powers and other socialist artefacts,urged by insecurities and electoral fears rather than ideology.

The government has shown some signs of waking up with Prime Minister Manmohan Singh putting the spotlight back on infrastructure. But the UPA should not need S&P to tell it to get a move on. It is aware of urgent priorities controlling inflation,decontrolling fuel prices,FDI in retail,allowing foreign airlines to invest in domestic carriers,long-pending reforms in the financial sector,tangible movement on subsidies. Singh has to pursue these with the daring and determination he showed in pushing the Indo-US nuclear deal. The Centre cannot keep blaming the governments in Bengal and Greece. Mondays S&P report was wishy-washy,merely wondering if India would be the first BRIC to fall with a thud. The next one could announce that fall from grace.