Pranab da; S&P threat to downgrade - and reception accorded to people coming out of prison !!!

You would have watched the fielding Captain bending to pick up some soil and drop that to determine what extent wind would assist the swing ! – you don’t need a specialized equipment to know for obvious changes of the wind – a  weather vane is an instrument  showing the direction of the wind. Once they were  architectural ornament, not so any longer as seemingly they are not in vogue any longer.   

Is that any indication ? – the most talked about Standard and Poor's downgrade warning to India has prompted the Opposition to accuse the UPA government of policy paralysis, governance deficit and disconnect.  The probable Presidential candidate from Congress [some sources continue to say] finance minister Pranab Mukherjee is ranting and raving about the rating stating that this  report was "not gospel truth or one that is cast in stone".  It is also a fact that it cannot be brushed aside so simply and perhaps has been the result of  UPA's toxic combination of poor economic decisions, lack of reforms and political roadblocks, pushing India to the brink.  India is at risk of losing its investment grade rating, which would make it the first BRIC (Brazil, Russia, India, China) economy to have its rating reduced to junk status.

On 11 June, Standard and Poor’s (S&P) released a report titled ‘Will India be the first BRIC fallen angel?’, warning of the possibility. The outlook on India’s rating had been reduced from stable to negative in April this year. The positive-negative-stable outlook that rating agencies use is like an early warning flag that tells the market what could lie ahead. A stable outlook says that the current sovereign rating of the country will not change in the next few months. A negative outlook means that there is a danger of the rating getting downgraded; the positive one is the reverse—the rating may get better. India moved to the investment grade rating in 2007 and has been stable at an S&P BBB-, but this changed in April with the stable outlook changing to negative. It usually takes between six months and a full year before the outlook change translates into a rating change. The S&P report, coming so soon after the change in outlook, has taken the market by surprise.

In a country replete with intellectuals, there are talks of trouble ahead while the FM Pranab still perennially speaks of hope perhaps of miraculous fix.  He rejected the report and Congress questioned the Agency’s understanding of Indian politics – ‘it is understanding of finance and economics and nothing of politics – somebody else quipped !’ – those who can sense politics everywhere spoke of the Analyst who authored the report being  a relative of a BJP leader from Bengal and portrayed the  comments in the report about the dysfunctional nature of the relationship between Prime Minister Manmohan Singh and Congress president Sonia Gandhi  as to the political nature of the report.

Rating agencies are not the messiahs but is it not a fact that the government’s failure to address structural deformities in the system for years together has played havoc with fiscal numbers. FM points to RBI and certainly RBI may yet deliver a rate cut – under political pressure – but will that steer the Nation off the trouble ? The S&P citing division of roles between Sonia Gandhi and 'unelected' Manmohan Singh,  has said that the crux of the current political problem for economic liberalisation is the nature of leadership within the central government and not 'the unruly’ allies or an 'unhelpful' opposition. And this has played spoil sport to the market rally with  Indian benchmarks taking a U-turn in market trade, retracing all its gains.  Sensex tumbled and Nifty fell below !  Market analysts say that investors shouldn’t be too nervous about S&P’s warning even as the currency market too reacted negatively to S&P’s statement.

Standard & Poor's (S&P) is an American financial services company. It is a division of The McGraw-Hill Companies that publishes financial research and analysis on stocks and bonds. It is well known for its stock market indices.  Headquartered in Manhattan, NY, the Company is one of the big 3 credit-rating agencies.

Even during this economic tumble, in another part of the World there was bigger buzz - around the return of Andimuthu Raja, former Telecom minister and the main accused in the 2G scam, surprised none in the State but only the few others who thought that the DMK would be in a fix on how to handle him when he gets back.  Touted as the country’s biggest corruption case, which also lost the party an election, common logic would have expected the DMK to be worried about the consequences of an unrestrained association with a scam-tainted Raja and there was talk of DMK dumping or putting him at the sacrificial altar.  He remained nonchalant, not uttering many words and when he finally returned - it looked as if there was no scam and that he was a hero; he lands at the Chennai airport to a rousing reception; and drives straight to Karunanidhi, who garlands him.  The ease and the beaming smiles, supporters calling braveheart who conquered Tihar……… Former Karnataka Lokayukta N Santosh Hegde  questioned the boisterous reception accorded to tainted former minister and DMK leader A Raja in the state.     “It (the reception he received) shows the denigration in societal thinking,” said Hegde. “Today people are sent to jail in a procession as if they are going on a foreign trip. And when they get bail and come out, we receive them in a way that shows the downward trend in societal laws,” Hegde said, delivering the Seventh Rajaji Memorial lecture in the city.

In this vast Nation, Raja is not alone – only recently, YSR Congress party’s founder, Y S Jaganmohan Reddy, taken into custody in a assets case, also got strong support from his cadres. Understanding Economics, Socialism, Plurality,  Politics – nothing appears easy as things, perceptions and decisions continue to change everyday….

With regards – S. Sampathkumar.