Why blame foreigners?

India has never defaulted on its debt, wrote Shashwat Alok. It came close in 1991 but, "Prime Minister PV Narasimha Rao ferried 47 tonnes of gold to the Bank of England as collateral. In contrast, the US has defaulted twice. Portugal, which has defaulted four times, also has a credit rating of Baa3". A paper in 2017 suggested that "nations culturally similar to the 'home' countries of the ratings agencies tend to receive a higher rating than comparable countries with the same economic and political fundamentals". Alok recommends that the "Centre for Advanced Financial Research and Learning (Cafral), the Reserve Bank of India's (RBI) policy research wing," should set up its own rating agency. But, will foreigners be guided by the RBI or their own ratings agencies? And, will that stop foreign banks from selling their loans to Indian companies? On 31 March 2019. foreign banks had outstanding loans of Rs 4.03 trillion in India, compared to Rs 57.72 trillion for public sector banks and Rs 32.58 trillion for private banks. Ratings agencies are following double standards, said an official, because, "Japan has a debt-GDP ratio of 250  and despite the denominator not growing as fast as India, it still attracted a higher rating". But, it is not just ratings agencies. Investors also prefer Japan to India. The yield on 10 year bonds for Japan is only 0.023%, showing low risk of inflation, and its probability of default is rated at 0.37, while yield on 10 year Government of India bonds is at 5.815% and default risk is rated at 2.19%. The Japanese yen has strengthened from over 120 to the dollar in 2016 to 107 to the dollar today, so investors will make money when they convert their gains from yen to dollar, while the Indian rupee has fallen from 64 to the dollar in 2016 to about 76 to the dollar today, so investors lose money as they repatriate their earnings. However, the State Bank of India (SBI) is not surprised by Moody's action because 21 emerging economies have been downgraded because of the Covid-19 outbreak. The markets had already priced this in because, "BSE Sensex and NSE Nifty rose and even Rupee appreciated against the US dollar." "For every Rs 100 of gross domestic product (GDP), India owed Rs 72 to the market in fiscal year 2019. Moody's expects India's debt-to-GDP ratio to worsen to 84% for fiscal year 2020-21," wrote Aparna Iyer. This is higher than other emerging economies. The government did not consult experts before imposing a "draconian" lockdown, said representatives of Indian Public Health Association (IPHA), Indian Association of Preventive and Social Medicine (IAPSM) and Indian Association of Epidemiologists. The lockdown is being lifted when the country is in a "community transmission phase".The lockdown was announced suddenly by Prime Minister Narendra Modi, giving just 8 hours notice, catching people totally unprepared. Just as he announced demonetization of 86% of our currency with 8 hours notice in 2016 ignoring RBI advice. Foreigners can see that government policy is decided on whim and there is no accountability for the carnage. Why blame them?