984 Who gave horns and fangs to International Credit Rating Agencies?

Bulls, deer etc. have horns on their heads for self-defence. Dogs, Wolfs etc. have fangs to split steaks they eat. But International Credit Rating Agencies which are four or five in number, seem to have horns to intimidate developing and under-developed countries, and fangs to feed on timid countries. Who gave them these horns and fangs? Not the Affluent Nations like U.S.A., U.K., France, Germany, Japan, China. But, developing and underdeveloped, poor countries like India. Why did they give? For mobilising foreign investments from Foreign Portfolio Investors (FPIs), Foreign Institutional Investors (FIIs), Foreign Individual Investors, Foreign Governments, Foreign Banks, Foreign Investment Agencies, Merchant Bankers, some of whom seem to attach great values to the Ratings given by these International Rating Agencies. But how many of those FPIs, FIIs, Foreign Governments care to check whether the Ratings made by the International Rating Agencies are accurate, and are not based on whims and fancies of the Directors/Managers of the Rating Agencies? If such checking had been done, the 2008 World Recession, following the Sub-prime Lending Crises in American Banks and the Wall Street Investment Empires such as Goldman Sache would not have taken place. Ratings obtained from International Rating Agencies, might have helped the Investment Decision-makers from embarrassment-s and loss of fat jobs, which might have enabled such decision-makers to hide under the not-too-reliable expertise of the Rating Agencies.

Criticism of Rating Agencies, by Mr. Arvind Subramanian, the Chief Economic Adviser of India

CEA's Criticism	yb-a-donkey's view
Rating Agencies have not upgraded India "despite clear improvements in our economic fundamentals" which include inflation, growth, and current account performance. Despite its rapid growth, India still has a BBB rating. China's rating has been upgraded to AA, despite its slowing growth and rising debts.	India is a Sovereign Nation. It has vast human and natural resources. It can produce any goods and services on a massive scale for exports. The export profits can be used as 'fresh investments' for setting up new export-oriented businesses, both manufacturing, and service businesses. India can also use Keynesian Investment Multiplier, by pump-priming (introducing newly created Central Bank's moneys into productive, export-oriented ventures. It can also buy required technologies. Where is the need for canvassing for Foreign Portfolio Investments, and Foreign Institutional Investments. Mr. Manmohan Singh, the Former Prime Minister of India, and the intermittant Vajpayee Government might have committed an error of judgement, or forced by circumstances, to invite foreign investments. But, the new 2014 NDA Government, there is no such compulsion. Why are we continuously begging for Foreign Investments? Have we fallen in a Foreign Investment trap? (similar to Foreign Debt Trap).
"Given this record, what we call Poor Standards, my question is - why do we take these rating analysts seriously at all?"	Instead of asking the question himself, CEA ought to have tried to answer the question. Another important observation which can be made is: Even IN SPITE OF / NOTWITHSTANDING low/mediocre ratings given by Fitch, Moodys, and Standard & Poor, India could mobilise considerable foreign investments. Hence, we should stop hankering about the Ratings given by the International Agencies. We can ignore them. If we have been paying them some subscriptions, we should stop. If we have been paying some commissions to Lobbyists in U.S.A., and Europe, we should stop.
They consistently fail to provide advance warnings of financial crisis and downgrade a country after the fact. In the US, they had given AAA ratings to mortgage-ridden securities, which later dragged down the economy and created a crisis.	Have we understood this harsh truth, too late?

Related news link

Click here to go to http://www.ndtv.com/india-news/chief-economic-advisor-arvind-subramanian-slams-rating-agencies-for-not-upgrading-india-1692288. A few quotes from this news report:

India has been consistently pushing for better ratings, which is expected to act as an endorsement to Prime Minister Narendra Modi's economic policies and help bring in much-needed investment. Since coming to power in 2014, the NDA government has aggressively chased investment - taking measures to streamline processes and bring down inflation.

But the three key ratings agencies --- Moody's, Standard & Poor's and Fitch - have not upgraded India, contending that the government needs to do more. In November, Moody's refused to upgrade India, said the economic initiatives of PM Modi's government are yet to produce results.

Among the issues the rating agencies have red-flagged are India's high debt-GDP ratio and bad assets of its banks. The agencies argue that the debt-GDP ratio, at 69%, is on the higher side and acts as a deterrent to private investment.

Personal views of ybrao-a-donkey, not intended to be imposed on others

Why should India have been consistently pushing for better ratings?
Why do Prime Minister of India's Economic Policies, need an endorsement from Foreign Rating Agencies?
Why should India aggressively chase foreign investments? We can chase domestic investments?

Is money-laundering of $100 million so easy?

Domestic Fund Flows may be moving abroad through Money Laundering Channels, and coming back to India as Foreign Investments from Hong kong, Singapore, China, Mauritius, etc. etc. If we can prevent outward flight of domestic funds, by plugging loop holes in our Foreign OUtward Remittance Systems, our Imports-payment systems, Export-Realisation Systems, there will be no need for us to beg for foreign investments.

One latest 2017 May example: A sum of Rs.6 billion (nearly $100 million) was remitted by a criminal business man in Visakhapatnam to Hong Kong, Singapore, China, ostensibly for import of software. The criminals are reported to have promoted about 30 shell Companies, opened accounts in various banks in Visakhapatnam, received funds from Kolkata collaborators, and remitted them to Hong Kong, Singapore, China, on the pretext of software imports. How easily and swiftly they could do ? Now those $100 million may be coming back to us as Foreign Portfolio / Institutional Investments.

Besides, we have to study why Indian domestic fund owners are hesitating to investment their funds in India directly, without sending them through the Money Laundering Route.

Who are these Moody's, S&P, and Fitch to prod and push India saying that "Government needs to do more". We need not do more. Who are they to say that our initiatives are not producing results?

If at all our Debt/GDP Ratio, bad assets of our banks are REALLY HIGH, that should be our headache. It is our duty to attend to them. Others need not PUSH us.

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