'No country can ignore ratings by credit rating agencies₹

Former Reserve Bank of India (RBI) governor and finance secretary DUWURI SUBBARAO recently wrote his memoirs Just a Mercenary? Notes from My Life and Career. He was candid in his new book that the answer to the question - "Was I a mercenary or was I more?" - will perhaps elude him forever. However, when it came to interaction with Business Standard journalists, the former member of the Indian Administrative Service (IAS) was anything but evasive. He gave his forthright views about fiscal concerns, freebies, farm loan waivers, the 2G scam and inflation targeting. Edited excerpts.

Your book said Union Finance Minister Nirmala Sitharaman adopted fiscal expansionary policies in the Budget for 202122. You argued this kind of policies might work in a downturn in an advanced world but not in emerging market economies such as India. Why do you think so?

I said this in the context of the eurozone sovereign debt crisis, which came shortly after the global financial crisis. As far as the finance minister is concerned, she went for relaxed fiscal consolidation and provided a longer timeframe a fiscal deficit at 4.5 per cent in 2025-26. But to her credit, she has been delivering on that.

But does the high level of sovereign debt worry you?

Yes, it does. I think the current level of debt of the central and state governments together is high. It went up as high as 90 per cent during Covid, and has come down a little bit now. But the Fiscal Responsibility and Budgetary Management committee said an acceptable and affordable debt-GDP ratio for India was 60 per cent 40 per cent for the Centre and 20 per cent for the states. Some people argue we should not be fixated on 60 per cent. I agree with that.

You said emerging market economies such as India should not be nonchalant about rating agencies' grades. However, the finance ministry recently came up with a report that found fault with these agencies' methodology for rating emerging market economies.