International rating agencies fail to provide warnings in advance of financial crises says, Arvind Subramanian

International rating agencies fail to provide warnings in advance of financial crises says, Arvind Subramanian
International rating agencies fail to provide warnings in advance of financial crises says, Arvind Subramanian.

New Delhi, May 11: Chief Economic Adviser Arvind Subramanian on Thursday discussed the assessments done by the international rating agencies and highlighted their values in light of their failure to provide warnings in advance of financial crises.

“Today, I want to illustrate a few examples from recent Indian experiences,” said Subramanian while speaking at the Competence, Truth and Power: Macroeconomic Commentary in India VKRV Memorial Lecture, Subramanian.

In his first case, he highlighted the International Rating Agencies with traded off examination and appraisals.

He said that as of late, the part of rating offices has progressively come into question.

“In the US money related emergency, inquiries were brought about their part up in confirming as AAA groups of home loan supported securities that had dangerous hidden resources (depicted in Michael Lewis’ The Big Short),” he said.

“Essentially, their esteem has been addressed in light of their inability to give notices ahead of time of monetary emergencies. Frequently evaluating minimise have happened post facto, an instance of shutting the steady entryways after the seeds have catapulted,” he included.

Adding to this, the Chief Economic Adviser said that as of late, the rating organisations have kept up India’s BBB-rating, despite clear enhancements in our financial essentials, (for example, swelling, development, and current record execution). (ANI)

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