Narendra Modi pushes for early creation of a Brics rating agency to counter western institutions
The Indian prime minister said such an agency was important to cater to the needs of developing countries.
Prime Minister Narendra Modi on Monday pushed for the early creation of a credit rating agency by Brics countries to cater to the needs of developing nations, The Economic Times reported. Speaking at the Brics plenary session in Xiamen, China, Modi said, “Our Central Banks must further strengthen their capabilities and promote co-operation between the Contingent Reserve Arrangement and the IMF [International Monetary Fund].”
The idea was first mooted in 2015 and the plan for a rating agency was announced by the Brics member countries – Brasil, Russia, India, China and South Africa – after last year’s summit in Goa in October. The agency is envisioned as an alternative to western rating institutions, which currently dominate the space. Standard & Poor’s, Moody’s and Fitch control 90% of the world’s rating business. Developing countries have often criticised western agencies for being biased in their ratings and frequently downgrading growing nations.
In May, Chief Economic Adviser Arvind Subramanian criticised the western ratings agencies and questioned their methodology for failing to upgrade India’s status in recent years, despite considerable economic progress. “In recent years, rating agencies have maintained India’s BBB- rating, notwithstanding clear improvements in our economic fundamentals (such as inflation, growth, and current account performance),” he said, according to The Times of India.
Moody’s has kept India at Baa3 rating since 2004, while Fitch and S&P have maintained their BBB- rating on India for over a decade. These are the respective agencies’ lowest investment grade ratings, below which a country is considered vulnerable to meet its financial commitments.
The three-day Brics summit ends on Tuesday.