Back to Basics: Why S&P downgraded India?

To be precise, double-talk, greed, corruption and an unmanageable economy have landed India on par with a country like Tunisia, which had undergone political upheaval recently and landed itself in Negative sovereign rating.

Double talk by the government, assuring the likes of G-7 or G-20 that its subsidies are being offset by a hike in oil price but indeed hiking only petrol price (not diesel). Isn’t it cross-subsidy that is underway? Did the government heed the oil companies’ cry? Why is it not transparent in subsidy distribution mechanism? Are the poor really benefited or is it the comfort zone for many officials and politicians?

The private sector’s greed is rampant with banking sector to manufacturing, all making more money at a shorter period fleecing the common and silent man on the streets? Banks charge hefty commissions on ordinary services despite the Reserve Bank of India’s notes, probably to recoup the losses made from lending to the likes of Kingfisher Airlines.

Corruption is turning into a Democle’s sword but everyone from the top to the bottom is turning a blind eye to it, leaving a bleak future for their children but to grow belligent. We are ranked 95th in the global corruption list. Aren’t we awaiting chaos and anarchy two decades down the line? Hardly a day goes by without a corruption scam making it to headlines in the country and on TV channels. Isn’t it eating into our infrastructure projects? When can we achieve decent levels of development with highly uneven regional development?

On the contrary, RBI remains silent when NBFC-microfinance institutions were battered to death in Andhra Pradesh last year with draconian rules subverting the very spirit of micro-lending concept. It knows that the government-driven Self-Help Groups were turning farce or bleeding. It took just one blow to make a mockery of the country’s debt-recovery mechanism at the bottom of the pyramid.

The government’s machinery and its legislators in Andhra Pradesh were mute spectators when the poor defied to repay loans but now it proved too costly for both — as without gold or other collateral, the poor cannot raise loans, while the government has lost its face in ensuring confidence among the investors.

Many more and the list is endless, but no wonder, S&P’s credit analyst Takahira Ogawa was not convinced.

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