Topic: Indian Economy and issues relating to planning, mobilization of resources, growth, development and employment.
7) Ratings agency Moody’s has lowered India’s outlook from stable to negative recently. How do such agencies assign these ratings? What do these ratings mean for India? Critically analyse.(250 words)
Why this question:
The article brings out the discussion of recently accredited credit rating by Moody’s to India and the detailed analysis of the same.
Key demand of the question:
Explain what credit rating is, what is the significance of it, what has been the impact of Moody’s credit rating on India and provide for a detailed analysis.
Critically analyze – When asked to analyse, you have to examine methodically the structure or nature of the topic by separating it into component parts and present them as a whole in a summary. When ‘critically’ is suffixed or prefixed to a directive, one needs to look at the good and bad of the topic and give a fair judgment.
Structure of the answer:
First highlight the fact that Ratings agency Moody’s has lowered India’s outlook from stable to negative.
Discuss first what credit rating is – A credit rating is an assessment of the creditworthiness of a borrower in general terms or with respect to a particular debt or financial obligation.
A credit rating can be assigned to any entity that seeks to borrow money — an individual, corporation, state or provincial authority, or sovereign government.
Explain the significance of credit rating agencies, their role.
Discuss the concerned issues with credit rating agencies.
Conclude with what should be the way forward.