How India lobbied Moody's for ratings upgrade, but failed

NEW DELHI: India criticised Moody's ratings methods and pushed aggressively for an upgrade, documents reviewed by Reuters show, but the U.S.-based agency declined to budge citing concerns over the country's debt levels and fragile banks. Winning a better credit rating on India's sovereign debt would have been a much-needed endorsement of Prime Minister Narendra Modi's economic stewardship, helping to attract foreign investment and accelerate growth. Since storming to power in 2014, Modi has unveiled measures to boost investment, cool inflation and narrow the fiscal and current account deficits, but his policies have not been rewarded with a ratings upgrade from any of the "big three" global ratings agencies, who say more is needed. Previously unpublished correspondence between India's finance ministry and Moody's shows New Delhi failed to assuage the ratings agency's concerns about the cost of its debt burden and a banking sector weighed down by $136 billion in bad loans. In letters and emails written in October, the finance ministry questioned Moody's methodology, saying it was not accounting for a steady decline in the India's debt burden in recent years. It said the agency ignored countries' levels of development when assessing their fiscal strength. Rejecting those arguments, Moody's said India's debt situation was not as rosy as the government maintained and its banks were a cause for concern, the correspondence seen by Reuters showed. Moody's and one of its lead sovereign analysts, Marie Diron, declined to comment on the correspondence, saying ratings deliberations were confidential. India's finance ministry did not respond to requests for comment. Arvind Mayaram, a former chief finance ministry official, called the government's approach "completely unusual". "There was no way pressure could be put on rating agencies," Mayaram told Reuters. "It's not done."

DEBT BURDEN, BAD LOANS

India has been the world's fastest growing major economy over the past two years, but that rapid expansion has done little to broaden the government's revenue base. At nearly 21 percent of gross domestic product (GDP), India's revenues are lower than the 27.1 percent median for Baa-rated countries. India is rated at Baa3 by Moody's, the agency's lowest notch for debt considered investment grade. A higher rating would signify to bond investors that India was more creditworthy and help to lower its borrowing costs. While India's debt-to-GDP ratio has dropped to 66.7 percent from 79.5 percent in 2004-05, interest payments absorb more than a fifth of government revenues. Moody's representatives, including Diron, visited North Block, the colonial sandstone building in the Indian capital that houses the finance ministry, on Sept. 21 for a discussion on a ratings review. The atmosphere at the meeting with Economic Affairs Secretary Shaktikanta Das, one of the ministry's most senior officials, and his team was tense, according to an Indian official present, after Diron had told local media the previous day that a ratings upgrade for India was some years away.

LOBBYING FOR AN UPGRADE

Four days later, the finance ministry sent an email to Diron questioning Moody's metrics on fiscal strength. The government cited the examples of Japan and Portugal, which enjoy better ratings despite debts around twice the size of their economies. "Given that countries are on different stages of economic and social development, should countries be benchmarked against a median or mean number (as is done by Moody's)" the email asked. In India's case, "while the debt burden lowered significantly post 2004, this did not get reflected in the ratings", the ministry argued. New Delhi urged Diron to look at improvements in the factors - better forex reserves and economic growth - that Moody's had considered when handing India its last ratings upgrade in 2004. In a reply the next day, Diron said that, not only was India's debt burden high relative to other countries with the same credit rating, but its debt affordability was also low. She added that a resolution to the banking sector's bad loan problems was "unlikely" in the near-term. In a last-ditch effort on Oct. 27, Economic Affairs Secretary Das sent a six-page letter to Singapore-based Diron, addressed to Moody's New York headquarters. Reiterating points on India's fiscal strength, Das asked Moody's for a "better appreciation of the factual position". Das dismissed Moody's concerns on India's public finances as "unwarranted" and told the agency that there was "scope for further lowering" the political risk perception to "very low". "In the light of stable external debt parameters and the slew of reforms introduced in the realm of foreign direct investment, you may like to reconsider your assessment on 'external vulnerability risk'," he wrote. Moody's on Nov. 16 affirmed its Baa3 issuer rating for India, while maintaining a positive outlook, saying the government's efforts had not yet achieved conditions that would support an upgrade.

India builds huge reservoirs to stop Pakistan's water

India has maximised its efforts to make complete use of water from the Indus River, according to a report released by BBC. It quoted Indian officials as saying that New Delhi is looking to build large reservoirs and canals to store more and more water from the Indus, Chenab and Jhelum over the coming years. Most of the water from these three rivers is allotted to Pakistan under the Indus Waters Treaty. Despite Pakistani efforts for peace with India, Modi-led Indian government has increased efforts to stop Pakistan’s water by building huge water storage facilities and canals along the Indus river system. A BBC report quoting senior official said that India is stepping up efforts to maximise its water use from the western rivers of the Indus basin. According to the Indus Water Treaty, Pakistan has unrestricted access to the three rivers, i.e. Jhelum, Chenab and the Indus. For its part, India was allocated unrestricted access to the three eastern rivers, i.e. Ravi, Sutlej and Beas. Experts warn India’s efforts towards this end to pose a serious threat to water security in Pakistan. Pakistan has already informed India of its serious reservations over the construction of two hydropower projects in the Indus basin. Pakistan has voiced its concerns that India may become capable of holding more than its just share as outlined in the Indus Waters Treaty. The three rivers flow through Indian-occupied Kashmir but most of the water is allotted to Pakistan under an international treaty.. Pakistan successfully built Warsak, Mangla and Tarbela dams. In an outrageous statement in November, Indian Prime Minister Narendra Modi said that water which belongs to India cannot be allowed into Pakistan. “The fields of our farmers must have adequate water. Water that belongs to India cannot be allowed to go to Pakistan. Government will do everything to give enough water to our farmers,” he had said. According to the BBC report, India wants to "maximise" its use of water from the Indus, Chenab and Jhelum rivers. Millions of people in both countries depend on water in the rivers. Islamabad has already objected over some of India's existing water projects. It has asked the World Bank, which brokered the signing of the treaty between the two countries, for a court of arbitration to consider two Indian hydropower projects in the Indus basin, the report said. In the past, disagreements between the two countries have been settled within the legal framework provided within the treaty. The World Bank’s role in the Indus Water Treaty is limited and strictly procedural. In September, Modi also reviewed provisions of the treaty with Pakistan. He along with other government officials evaluated the pros and cons of the treaty.

Malala supports Peshawar Zalmi in PSL

LONDON: World’s youngest Nobel laureate Malala Yousufzai was presented Peshawar Zalmi merchandise by owner Javed Afridi as he met her family in the UK. Malala, who belongs to the Swat district of Pakistan’s province Khyber-Pakhtunkhwa, in return presented a copy of her book ‘I am Malala’ to Javed Afridi. The book was published in 2013 and has sold more than one and a half million copies across the globe.

The owner, Javed, in his tweet, said he met Malala with ‘mixed emotions’. He also appreciated her work ‘to uplift women education globally’.Peshawar Zalmi is one of the five teams which are a part o.