Patna : International Rating Agency Fitch issued a report with regard to the Indian economy on April 15, 2020. In its report, Fitch has said that India has less fiscal room to support economy and that rise in India’s debt-GDP ratio is likely to weaken credit profile. The debt to GDP ratio of India has been compared mostly with that of small, emerging economies.
The report further mentions that economic activity in India has been hit hard by the COVID-19 pandemic, as in many other countries, especially those which have imposed lockdowns. We, in India, should listen to International Rating Agencies like Fitch and respect their analysis. However, we should not take their analysis as the final word, since the analysis may not be a complete one.
In this instance, for example, Fitch seems to have forgotten to mention the following facts alongside its analysis of the economy of India :-
Ø That in United Kingdom, the Government debt was 85.9% of GDP (2018).
Ø That in Spain, the Government debt was 97.6% of GDP (2018).
Ø That in France, the Government debt was 98.4% of GDP (2018).
Ø That in Italy, the Government debt was 134.8% of GDP (2018).
Ø That as a share of the U.S. economy, the national debt stood at 78 percent of GDP in 2018. But the CBO (The Congressional Budget Office – a federal agency with the legislative branch of the United States government that provides budget and economic information to Congress) says it may rise to 93 percent by the end of 2029.
Ø Now compare it with India’s debt to GDP ratio which stood at 68.4 percent in February, 2019.
If an International Rating Agency like Fitch says something about the Indian economy, should it make comparisons of the Indian economy only with smaller developing economies ? Should the fiscal room available to India’s economy not be compared with that available to the economies of countries like the USA, the UK, France, Italy also, for making the comparison more realistic ?
We Indians have to practice seeing things in perspective – not go only by the lopsided and out of context analyses being presented by others!
If we do that, we shall have no doubt in our minds that India is going to be the great economic powerhouse that it deserves to be!