Union Commerce and Trade Minister Piyush Goyal.
The country’s Commerce and Industry Minister Piyush Goyal was seen lambasting foreign rating agencies during a program. He said that as the country is moving towards the goal of Developed India 2047, we need to establish a strong, trustworthy and world-class rating institute of our own. Goyal said that despite strong infrastructure, global rating agencies did not raise India’s rating for a long time. He said in CareAge’s program…The Dialogue that as we move towards a developed India 2047, we should aim to establish our own strong, credible and world-class rating institute. Goyal said that credit rating agencies play an important role in the cycle of development.
Investment comes on the basis of rating
He said in the program that investors look at the ratings given by the agency. On this basis you increase investment, you also increase business confidence. This business confidence will boost both capital inflows and credit flows. Banks consider rating as an important criterion. Loans are given, entrepreneurs or businesses take big and bold steps with the confidence gained from the rating and jobs are created.
blowing small crises out of proportion
He said that often some rating agencies exaggerate even minor irregularities or changes in the Indian economy. Goyal said that the signals of crisis they give are much greater than the reality and that is why I also urge CareAge to play a responsible role in helping investors, bank employees… The minister said that he has urged his team to give prominence to the ratings done by our own indigenous rating agency.
MSMEs are compared with big companies
Goyal further termed the current credit rating framework as “ridiculous”. He said that MSMEs are evaluated on the same criteria as billion dollar companies. Goyal further said that a small engineering firm of Rs 100-200 crore or a steel processing company is benchmarked with JSW Steel, which is a $100 billion company. Just because both of them are in the steel sector. I think this is extremely ridiculous. Whoever has created this structure is accountable. The minister urged rating agencies and regulators to develop a more realistic system that recognizes the strengths of MSMEs.
It is useless to make such comparisons
He said the absence of any small firm with an AAA rating reflects the shortcomings of the current approach. He further said how can an MSME company with a turnover of Rs 100-200 crore be compared with a company with a turnover of Rs 50,000 or Rs 1,00,000 crore? I don’t know who is responsible for this, but perhaps CareAge should raise this issue in its discussions with the regulators. Goyal further said that companies should be compared on the basis of their size.