Don’t focus overly on ratings: Rajan

Mumbai, Aug. 6: India’s policymakers should focus on protecting the economy as businesses struggle amid the coronavirus pandemic instead of being overly focused on what ratings agencies think, former Reserve Bank of India governor Raghuram Rajan said on Thursday.

“It is also important to convince both domestic and international investors that after the crisis associated with the pandemic is over, we will return to fiscal responsibility over the medium term, and the government should do more to convince them of that,” Rajan told the Global Markets Forum.

The government has announced several initiatives to help the poor and small- and medium-size businesses, but actual cash outgo from the government’s measures has been estimated at just about one per cent of GDP.

Several attribute the fiscal prudence to fear of a downgrade after Moody’s cut India’s rating and outlook in early June followed closely by a change in outlook from Fitch.

“The RBI and government have certainly been cooperating, but it seems like it is elsewhere, the ball is in the government’s court to do more,” Rajan said.

He said the RBI needs to focus on whether credit is reaching the stressed areas of the economy and also if the viable firms were able to access credit and not the unviable ones.

“And I think that’s where it has to focus its attentions, because resources, as you well know, are limited in India.”