If a new rating index developed by the Finance Ministry and christened as CRIS is any yardstick to go by, the prospects of investments in India have markedly improved over the last five years.
Unveiling the ‘Comparative Rating Index of Sovereigns' (CRIS) on the basis of sovereign ratings of various countries compiled through rating data of Moody's and GDP (gross domestic product) data of the International Monetary Fund (IMF), Chief Economic Adviser Kaushik Basu said, “India's score has risen from 66.47 in 2007 to 69.83 in 2011. In other words, in relative terms, India has become a better investment destination by 5.06 per cent.”
In terms of CRIS, which takes into account the GDP and rating data of 101 nations, India's rank moved up from 61st position in 2007 to 55th in 2011. The improved score, Dr. Basu told reporters, was partly due to the decline in scores of some European nations, leading to deterioration of the world average by over 4.8 per cent.
“As for investors, relative or comparative rating is such an important concept, it was felt that we ought to develop a new index which captures precisely this idea,” he said adding “CRIS would be a periodic feature.”
The release of CRIS data would henceforth be a periodic feature and further details on this index would be contained in the Economic Survey to be laid in Parliament in March.
As per CRIS, Paraguay, Indonesia and Peru were the countries that posted the maximum increase in their ratings between 2007 and 2011 while Portugal, Ireland and Pakistan witnessed the biggest fall in the index. The formula used for calculating CRIS, Dr. Basu said, would be in public domain at a later stage.
“We did some research ... We believe we are the first [to develop such an index],” he said.
Explaining the basis of CRIS further, he said major credit ratings agencies provided sovereign credit rating of each nation as an absolute grade. How other nations fared did not matter in a particular nation's rating score.
“When an investor searches across nations for a place to put money, the relative rating of nations is important ... [it is entirely possible] a particular nation that has had no rating change may now be better off or worse off in comparative terms,” he said.