'Indian regulatory regime has brought us a world of good' BS 241209

Q&A: Deven Sharma, President, Standard & Poor`s
In the backdrop of the global financial crisis, credit rating agencies have faced criticism worldover.
Regulations are now being strengthened to guard against such crises. Rating agency Standard & Poor's
(S&P) is using the experience of working with the Indian rating agency, Crisil, a subsidiary of S&P, to its
advantage. Deven Sharma, president, Standard & Poor's, spoke to Rajesh Bhayani how they are leveraging
their Indian experience for global operations. Excerpts:
How the Indian economic situation has changed after the new government took charge at the
Centre, and when the change will be reflected in S&P's rating for India?
We feel the Indian economy is set to grow faster than 6.5 per cent. Apart from a stable government at the
Centre, there are several positives like the growing industry and service sectors and so on. What is worth
watching is how the fiscal deficit is being reduced and how inflation is controlled when commodity prices are
going up.
A sovereign rating is an independent exercise subject to periodic reviews. Analysts independently decide
when to review the rating. Recently, we have changed sovereign ratings of some European countries. For
example, ratings for Ireland, Greece and Spain ratings have been lowered, while we have reaffirmed the
rating of Germany. We are eager to see the Indian government continuing the reform process decisively.
Perhaps the budget might give us more clarity.
The Indian government had disagreed to the downgrading of India's sovereign rating. How did you
tackle that?
As in any other case where we deal with issuers, companies, or investors, we explained the rationale for the
downgrade transparently to the government.
But later did you have to change the analyst who downgraded India's rating?
We have policy and guidelines to move analysts. I don't remember any such movement after the
downgrading, but a change in analyst, if any, was certainly not linked with India's rating decision. I must tell
you that analysts are given full freedom to give their decision on ratings and they have to maintain
transparency.
When do you think India should withdraw economic stimulus?
Economies worldwide coming back to the growth path provide a chance to bring down the level of stimulus.
However, it is crucial to manage this transition. Withdrawal of stimulus should not affect growth. The
government in India and elsewhere should navigate uncertainties like rising commodity prices and
inflationary pressures while any decision on raising interest rates is taken.
The credit rating business is increasingly coming under stricter regulations everywhere. How do you
react to this?
The US stipulated regulations for credit rating agencies in 2006, and Europe, Japan, and Australia followed
up. We were regulated in India much earlier. In fact, India gave us a good learning experience of working in
a regulated environment. We have operated really well under regulation.
You have taken over as chairman of Crisil too. How do you propose to integrate Crisil more and
more with S&P's operations?
This integration is an ongoing process. A few years ago there were a hundred Crisil analysts working for
S&P, and now the figure has increased 5-6 times. We are increasingly leveraging Crisil's analytical skills and
resources to support our global operations. We are also using Crisil's innovations and creativity as a
learning lab to expand in other emerging markets.
Do you propose to merge Crisil with the S&P brand?
We plan to continue the Crisil brand, as it is a great one with very good recognition.
Can you name some of the areas where you would like to carry forward Crisil's work in other
market?
Crisil's rating for small and medium enterprises (SMEs) is a good example and we would like to use this
product in other markets. Another area where Crisil's experience and practices can be used is the various
initiatives taken by them on the infrastructure side. In fact, Crisil is a very good learning lab for us,
continuously providing training and innovations.
S&P has good business experience in developing indices and products. How will that be brought to
Indian market?
We have a joint venture with the National Stock Exchange for the indices business, and we will continue to
expand that business and develop more indices and exchange-traded funds (ETFs). Fixed income indices
could be a product category that Indian investors might be interested in. A senior official of the bank said an
official announcement of the scheme was being finalised and would be made in the next 2 days. Under the
scheme, the bank would offer home loans at 8 per cent for the first two years, after which floating rates
would be charged, the official said.