Finance ministry develops comparative index for sovereign rating

The ministry of finance developed a new system for comparing the relative ratings of sovereign debt based on the historical evolution of the countries' ratings over five years and the volume of their economic activity as measured by their gross domestic product GDP.

The index uses external data on GDP and ratings combined in terms of pure mathematical and statistical methods without interventions or interpretations. The GDP is also not adjusted for purchasing power parity (PPP).

The ministry has developed a relative rating index and ranked 101 economies according to this for the years 2007 to 2011.

The finance ministry said it used Moody's long term foreign currency sovereign ratings of all countries in the calculation and has verified the ratings with the Moody's rating for India in 2007 and 2011, which was the same (Baa 3). The CRIS score for these years for India were 66.47 (2007) and 69.83 (2011), the ministry said in a release.

In relative terms, according to the finance ministry index, India has improved its position as a better investment destination by 5.06 per cent.

Also, India's rank in terms of CRIS has moved up from 61st to 55th. ''If we view the rankings in terms of quintiles (blocks of one-fifth of the distribution) India moves from the fourth quintile to the third, that is, the middle quintile,'' according to the release.