S&P rating agency blames Sonia, Manmohan for policy mess

13 June, 2012

The article discusses the rating agency S&P's view on India's slow economic reforms due to party and government differences, and its effect on India's credit rating.

THE INTERNATIONAL rating agency Standard & poor, which has already downgraded India’s rating from stable to negative in April, has issued another warning that it will further reduce the Indian credit rating. The primary reason according to the rating Agency is the difference of opinion between party and government over moving forward the economic reforms. While some in the party and allies of the coalition opposed some economic policy decisions and the opposition is not helping in the matter.

In a report on BRIC countries of which India is member the rating agency said the slowdown in GDP growth, slow reforms coupled with political roadblocks put India at risk of losing its rating for investment grade. The agency in its report blames the division in Congress party in moving forward with reforms to up the GDP. The agency says Sonia Gandhi the Congress president is powerful than the Prime Minister Manmohan Singh. The division of two roles with more powerful Sonia and Manmohan has already affected many policy decisions.

The rating agency further said the PM in dark with his inability to influence his own cabinet members and cannot proceed on reforms. The S&P further adding that with an economist as Prime Minister will help India economy moving forward but what is happening is negative and India’s rating and potential for development is eroded. The setback in economic reforms to move forward could eventually hurt India’s long term growth prospectus and its credit rating according to the agency.