CEA Subramanian pointed out that since the COVID-19 outbreak, rating agencies have downgraded around 33 countries, adding that sovereign ratings are not a leading indicator.
Rating changes, upgrades or downgrades are not really a big event for markets, Chief Economic Adviser Krishnamurthy V Subramanian told CNBC-TV18. Going by assessment of the historical data pertaining to impact of ratings changes, Subramanian said that the same does not seem to really guide market action.
His comments come in the wake of India's credit rating downgrade by Moody's. The agency on June 1 downgraded India's local-currency senior unsecured rating to Baa3 from Baa2, and its short-term local-currency rating to P-3 from P-2, with the outlook remaining negative.
In the interview, CEA Subramanian pointed out that since the COVID-19 outbreak, rating agencies have downgraded around 33 countries. However, sovereign ratings are not a leading indicator, he said, adding that we should not be guided by the same.
Frequently Asked Questions
A vaccine works by mimicking a natural infection. A vaccine not only induces immune response to protect people from any future COVID-19 infection, but also helps quickly build herd immunity to put an end to the pandemic. Herd immunity occurs when a sufficient percentage of a population becomes immune to a disease, making the spread of disease from person to person unlikely. The good news is that SARS-CoV-2 virus has been fairly stable, which increases the viability of a vaccine.
There are broadly four types of vaccine — one, a vaccine based on the whole virus (this could be either inactivated, or an attenuated [weakened] virus vaccine); two, a non-replicating viral vector vaccine that uses a benign virus as vector that carries the antigen of SARS-CoV; three, nucleic-acid vaccines that have genetic material like DNA and RNA of antigens like spike protein given to a person, helping human cells decode genetic material and produce the vaccine; and four, protein subunit vaccine wherein the recombinant proteins of SARS-COV-2 along with an adjuvant (booster) is given as a vaccine.
Vaccine development is a long, complex process. Unlike drugs that are given to people with a diseased, vaccines are given to healthy people and also vulnerable sections such as children, pregnant women and the elderly. So rigorous tests are compulsory. History says that the fastest time it took to develop a vaccine is five years, but it usually takes double or sometimes triple that time.
He highlighted that debt sustainability should not be an issue for India as long as we are able to maintain the growth rate at or around the 4 percent estimate.
However, he spoke about the significant uncertainty on the demand side, adding that individuals tend to be far more conservative with respect to spending, vis-a-vis businesses. The increasing balances in Pradhan Mantri Jan Dhan Yojana (PMJDY) accounts have increased, which he said shows people are not spending.
The country's growth rate for FY20 fell to an 11-year-low of 4.2 percent. A further hit is expected in the ongoing quarter as businesses across the country were at a virtual standstill due to the nationwide lockdown to contain the COVID-19 pandemic.
Earlier today, addressing the annual session of the Confederation of Indian Industry (CII), Prime Minister Narendra Modi said the country's industry leaders need to invest in building robust local supply chains to strengthen India's position in the global supply chain. He added that even though the COVID-19 pandemic has slowed down India's speed, the country has now moved from the lockdown to unlocking its economy. Expressing his faith in participants across economic sectors, he said that the country will get back its growth.Also Read | PM Modi to businesses on building Atmanirbhar Bharat: Invest in building robust local supply chains for global orders