Moody’s at it again: This time round it clubs India with terrorist hotbeds

More than three decades ago, Justice Krishna Iyer in his usual bombastic style thundered - who will judge the judges, who will police the police and who will audit the auditors? In those days, rating agencies had not made their mark outside of the US. Had they, Iyer would have added for good measure who would rate the raters? Because rating agencies right from their inception have not covered themselves with glory, and in fact have been suffering from credibility crisis along with their brethren, auditors. [caption id=“attachment_2189989” align=“alignleft” width=“380”]  Reuters [/caption]Both charge their fees from companies engaging them thus resulting in worst conflict of interest - you don’t bite the hand that feeds you. While auditors at least can be proceeded against for dereliction of duties, credit rating agencies shrug off catastrophic events not predicted by them as hazard everyone has to take in their strides! The Financial Crisis Inquiry Committee in the US constituted to investigate the 2008 financial crisis originating in the US but enveloping the whole world thanks to the greenback’s reserve currency status minced no words in condemning the big three — Moody’s, Standard and Poor’s and Fitch — for their less than professional role in awarding triple-A ratings blithely to what turned out to be junk bonds albeit backed by mortgages. Moody’s in particular was generous in awarding between 2000 to 2007 triple-A ratings (safest) to as many as 45,000 mortgage-backed securities when it had during that period done so only for six private sector companies. The rater knew as well as anybody that home loans were granted mostly to the NINJA category — no income, no jobs and no assets — from whom recoveries could be made only by enforcing the mortgage when push came to shove. But it gave the best rating to the bonds backed by such mortgages through slicing and dicing, euphemism for mixing bad loans with good. Be that as it may, these worthies didn’t predict the 1997 Asian financial crisis either. Now, in a report dated 6 October 2015 Moody’s says “more than 60% of all (terrorist) incidents in 2013 were concentrated in just four countries. Iraq (24% of terrorist incidents, Pakistan 19%, Afghanistan 12% and India 5.8%.” The report concedes that at 690 attacks, it translates into less than half attack per million of Indian population as opposed to the global average of 2.4 attacks per million but nevertheless has chosen to caution the world against India. That the events of 2013 have been reported in 2015 speaks volumes about the rating agency’s efficiency and motives especially given the fact that it has deemed it fit to make India an unsafe investment destination in the eyes of foreign investors. That India has been bracketed with terrorist hotbeds — Pakistan, Afghanistan and Iraq — would rankle every patriotic Indian when the facts are to the contrary. Unlike these three nations, India does not harbor and nurture terrorists but like Israel is a victim of hostile neighbors’ designs. By Moody’s syllogism, even the US and the UK are terror states whereas the truth is they too are victims, actual or potential, of terrorist attacks. The report sounds hollow, dubious and contrived coming as it does at a time when India has attracted the highest FDI and FIIs are still the movers and shakers of its bourses. Terrorism indeed slows down growth and increases the cost of sovereign debts besides leaving its impact for a long time as the report says but these dire warnings apply to terrorists infested states and not to India whose new government at the center has been fairly successful in halting terrorists in their tracks. True, India growth is slackening and as a direct fallout unemployment is increasing but these by no means are due to the fanciful perception that India is an unsafe destination. On the contrary, India shines as a beacon of hope and development with China running out of steam and a large part of Europe still in tatters due to a variety of reasons including the ill-conceived economic union it forged 15 years ago. If the FDI is not pouring into India at a torrential pace, it is because the US and European companies have to first set their own houses in order. Moody’s knew all these but blithely chose to release a report that is a non sequitur — its own statistics do not support its conclusions. The report is just plain mischievous.