Mata Hurry writes from New Delhi: It would seem, that for a few brief moments, ominous clouds gathered over India’s economic horizon on 25 April, when the international rating agency S&P assessed India’s long-term sovereign credit rating.
The agency stated that there was a “one-in-three likelihood of a downgrade if the external position continues to deteriorate, growth prospects diminish, or progress on fiscal reforms remains slow in a weakened political setting,”
Economic growth fell to 6.9 per cent in the fiscal year ending 31 March, after growing steadily at over 8 per cent in the previous two years. Massive spending on welfare schemes and subsidies caused the fiscal deficit to soar to 5.9 per cent of Gross Domestic Product. Meanwhile the trade deficit has risen 56 per cent over the last year.
Initially the stock market was rattled, and stocks tanked, but the shock wore off and the markets ignored the news after a few hours of volatile trading.
The Finance Minister Mr. Pranab Mukerjee, smiled in his usual avuncular manner and said there was “no need to panic” while another cabinet member hoped and prayed for a good monsoon.
The Finance Minister said he would start imposing austerity measures to reduce the fiscal deficit. He would set an example to the entire nation by reducing his consumption of S&P or salt and pepper in his diet. Other members in his cabinet would be advised to do the same.
To plug the widening chasm in the fiscal deficit, taxes would be raised to 90 per cent. This would include the poorest of the poor who survive on 28 rupees a day. They will now have to live on 2.8 rupees a day.
Citizens protesting against these measures will be arrested and be compelled to read reports compiled by S&P, Moody’s and Fitch for six months of their incarceration.
The Prime Minister, Manmohan Singh, was unruffled and uncommunicative. The Prime Minister’s Office declared on his behalf that he was not aware of the S&P downgrade. He would appoint a committee to look into the matter after receiving the green signal from the Congress Party boss, Sonia Gandhi.
An unreliable source would not confirm or deny if the CBI or the Central Bureau of Investigation would start a criminal probe into the malicious downgrade by S&P.
An anonymous member of the Congress Party suspected that a deadly”foreign hand” was behind the S&P report. When he was informed that the ratings agency Standard and Poor’s was a foreign agency based in New York, he declared that India’s latest ICBM Agni V should be launched to eliminate this monstrous enemy. It was pointed out to him that the range of the missile was limited to 5,000 kilometres.
The Deputy Chairman of the Planning Commission Mr. Montek Singh Ahluwalia too was unfazed by the S&P downgrade.
The Commission was quick to react. A few weeks ago, Mr. Ahluwalia had pegged the poverty line at 28 rupees a day, in a widely publicised press conference
Taking a cue from the ‘Poors’ in the Standard and Poor’s downgrade, the Commission reduced the poverty threshold to 15 rupees a day “This will improve our macro numbers, and the number of ‘poor’ in India will fall. Ratings agencies will be impressed,” he said as he punched in the new poverty data in his laptop.
Meanwhile, at the stock exchange brokers could be seen hurling the credit rating agency’s report into waste paper bins. “We’re giving this report a D grade. It’s junk,” declared a broker.
Disclaimer: You are advised to read this story with a pinch of salt and pepper.