New Delhi: During the first COVID-19 wave in India, in mid 2020, the Union Ministry of Finance appeared to have something else on its mind – to counter the “negative commentary” on India by global think-tanks, indices and media, which could lead to India’s sovereign rating being downgraded, the Indian Express has revealed.
Then principal economic advisor in the Ministry of Finance Sanjeev Sanyal prepared a presentation in June 2020 titled ‘Subjective Factors that impact India’s Sovereign Ratings: What can we do about it?’ for internal government circulation. It was 36 pages long, according to the Indian Express report, and highlighted that 18-26% of a country’s sovereign rating is based on subjective factors such as assessments on governance, political stability, rule of law, corruption and press freedom.
“In most cases, India’s ranking on these subjective factors is well below peers. This pulls down its sovereign ratings,” Sanyal’s presentation said, according to the Indian Express.
The World Bank’s World Governance Indicators (WGI) is often used as a proxy for these indicators, Sanyal noted. But the WGI itself came under criticism from him – he said, according to the Indian Express, that it is an “arbitrary” indicator based on impressions from the Western media, some NGOs and a few academics.
“There is a danger that we may witness a drop in WGI scores due to the latest negative commentary on India by think tanks, survey agencies and international media. This could possibly downgrade our Sovereign Ratings to junk. Hence, it is of utmost importance to reach out to these think-tanks and survey agencies and set a positive narrative about India in general,” the presentation said.
The presentation also notes what, specifically, is leading to this negative commentary – the Union government’s Hindu right-wing agenda, and laws passed that were seen as furthering it. “Specifically, Jammu and Kashmir Reorganisation Act of 2019, Citizenship Amendment Act, 2019, National Register of Citizens and construction of a Hindu temple at a disputed religious site by Prime Minister Narendra Modi and his ‘Hindu nationalist’ Bharatiya Janata Party are seen as an exercise ‘targeting Muslims’ and ‘threatening secular nature’ of our country.”
The government, Sanyal said, had to try and make sure that the sources used for the WGI were not only projecting negative comments about India. “The WGI scores run with a two-year lag. Hence, the latest available scores are for the year 2018. However, most third-party sources publish their reports every year. The commentary in these reports provides a clear indication of which way the scores will move in the coming years,” his presentation said. “We need to reach out to the top third-party sources – initiate continuous discussions, clearly spell out the country’s reform measures and sensitise them of our internal matters.”
“In many cases, the think-tanks do not have an India expert or have not updated their information. Many of them base their rankings on cursory surveys of opinions from a small number of journalists/ NGOs/ academics. The government needs to think of ways to reach out to these agencies, initiate continuous discussions, clearly spell out the country’s reform measures and sensitise them on our internal matters and better understand their methodologies as well,” Sanyal continued, saying that “last minute protests” would be of little use.
Sanyal, now a member of the Prime Minister’s Economic Advisory Council, did not respond when asked for a comment by the Indian Express.
The same month, Moody’s downgraded India from Baa2 to Baa3 (the lowest investment grade of ratings) and maintained a negative outlook. Weeks later, Fitch Ratings too changed India’s outlook from ‘stable’ to ‘negative’. The government reached out to ratings agencies in the months that followed, Indian Express reported, and on October 5, 2021, Moody’s Investors Service raised the outlook on India’s sovereign rating to ‘stable’ from ‘negative’.
Over the last eight years of the Narendra Modi government, India has seen its ranking fall in several global indicators that measure press freedom, democracy and other rights. For instance, Sweden’s V-Dem Institute has classified India as an ‘electoral autocracy’ for two years running, and the US government-funded NGO Freedom House has downgraded India from ‘free’ to ‘partly free’.