Sovereign rating market dominated by three agencies

Venkatachari Jagannathan
Chennai (IANS) | Indicating the need for a non-Western credit rating agency, a senior industry official said that the sovereign rating by the global credit rating agency is in currency transactions and a downgrade will affect the country’s currency.
Speaking to IANS on condition of anonymity, the official said: There is a perception that there is a slight bias in India’s sovereign rating by western credit rating agencies. According to the official, credit rating agencies that rate countries also take into account per capita income in dollar terms and the legal framework, such as commercial transactions, debt resolution and others, that exist in the rated countries.
Agreeing that these need some improvement in India, the official said sovereign credit raters do not take into account the country’s service economy, economic depth, infrastructure spending and foreign exchange reserves. The official said that unlike many other countries which have debt denominated in dollars, most of India’s borrowings are rupee loans.
This raises the question, is there a need for a non-Western credit rating agency? An idea has already been mooted for a BRICS (Brazil, Russia, India, China and South Africa) credit rating agency. At present, three agencies – Moody’s, S&P and Fitch – dominate the sovereign rating market.
Perhaps smaller credit rating agencies could issue shadow sovereign credit ratings, which incorporate regional factors such as political parties, which come out with shadow budgets ahead of the actual budget presented by the state government. Similarly, a common currency for the BRICS countries is a step towards demonetisation.