The layman and the S&P report

I am a layman when it comes to fiscal matters.More so when it is related to the nation's fiscal stability .For the last couple of days,in the print media and TV it is all about the S& P report about India's financial stability and FM Pranab Mukherji's claims that the situation is not alarming. All I have gathered is that Standards & Poor's is a US credit rating Agency and it gives credit rating for Sovereign States too .The current hullabaloo is about its recent report titled " Will India be the first BRIC fallen Angel ?" .BRIC refers to the four emerging economies Brazil,Russia ,India and China.This is an acronym coined by another US investment management and financial services company some years ago .The report warned that India has the risk of losing its 'investment grade ' status due to slow GDP growth .

 But my surmise is different .I could read more from the S&P report warning.The warning says 'political roadblocks to economic policy making could put India at the risk of losing its investment grade status '. The report says what is pulling down the economy is the division of roles between Sonia Gandhi and the PM. S&P says this has weakened the economic policy making.It also talks about PM's inability to initiate reforms.S&P report says political compulsions are holding back reforms for growth.It is true fearing protests from allies many economic reforms are kept in abeyance like allowing FDI in retail sector,allowing Foreign investment in pension sector etc. AAA is the excellent credit rating given by S&P .S&P has downgraded India's rating to BBB-(negative). This is considered risky. 

 Finance Minister Pranab Mukherji says government is fully seized of the current situation and hopes a turnaround in coming months.But he sniped at S&P's claim that India would be the first BRIC country to lose investment grade status.In his defence he also said this warning by S&P is not after a fresh rating . In April the rating was BBB.Now the rating has slipped to BBB-(negative).FM claims between April and june the economy's vulnerability to shocks has not increased.A logical point indeed.But FM tacitly agrees the economic health of the nation is not that rosy .He is still optimistic that growth in GDP for this year would be 7 %.In 2010-11 the GDP growth rate was 8.4 % and for the first quarter of 2011-12 the GDP growth rate was 5.3 %. Experts say this is because India's factory output for the last 5 month's has been minus 3.5 % .Experts feel these are indicators of concern .

 Manish Tiwary the congress spokesman says the S&P Report is not a 'gospel truth' .S&P first changed India's credit rating from 'stable' to negative. And with in two months of changing the credit rating to negative, issued the warning in its website.Initially the warning was accessible only to its subscribers .Later it was released to the media .Also the title of the report " Will India be the first BRIC fallen Angel ?" do raise some eyebrows .Attributing slow growth rate to divisions between UPA chairperson Sonia Gandhi and PM Manmohan singh appears to have some political overtones to the S&P report .The S&P report is credited to a Bengali financial analyst of S&P Joydeep Mukherji. 

 The common man on the street is not a financial expert .Neither can he comprehend the effects of this downgrade by S&P nor understand about the likely turnaround predicted by Pranab Mukherji.His needs are different .He would be happy as long as the government caters to his basic needs. sovereign credit ratings do not bother him. His needs are a roof to live,a job to make a living,affordable quality education,affordable quality health care,hygienic sanitation,uninterrupted power supply,access to potable water,controlled inflation rate,affordable quality public transport facilities and corruption free governance.For the common man credit ratings do not mean anything .Credit rating and growth in GDP should translate in to these meaningful tangible benefits to the common man.