5)Discuss how rating agencies impact the economy of any country. In this backdrop, analyze whether moving away from Western dominated rating agencies would be beneficial for India.(250 words)

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TopicIndian Economy and issues relating to planning, mobilization of resources, growth, development and employment. Inclusive growth and issues arising from it.

5)Discuss how rating agencies impact the economy of any country. In this backdrop, analyze whether moving away from Western dominated rating agencies would be beneficial for India.(250 words)

The Hindu

 

Why this question

Time and again India expresses its displeasure at the refusal of rating agencies to improve India’s score. Also India and other developing countries have raised question mark over the neutrality of the rating of such agencies. Last year’s Economic Survey also highlighted this point. Thus the topic becomes important

 

Key demand of the question

The question demands us to answer the following

  • How rating agencies work and how they impact a country’s macroeconomy
  • The advantages (or not) of India using BRICS platform to create a rating agency

 

Directive word

Analyze – Here it’s a broader directive than examine. Analyze the idea of BRICS rating agency from several dimension such as economic, geopolitical etc. Thereafter summarize the arguments you made

 

Structure of the answer

Introduction – Highlight that India has consistently made a demand.

 

Body

  • Describe the working of rating agencies and how they impact the macroeconomy of a country
  • Analyze the need for India to set up a BRICS credit rating agency
  • Economic
  • Raise capital at lesser rates
  • More investment etc
  • However debt will increase
  • etc
  • Geopolitical
  • Challenge the domination of west on international financial institutions
  • Whether India and china can work together
  • Etc

 

Conclusion – summarize your arguments and mention what precaution should India take before setting up such an agency.