From USAAA to USAA+

How the debt downgrade is a wakeup call for everyone, including India

01 September 2011
Tourists pass in front of Standard & Poor’s headquarters in New York. On 5 August S&P downgraded US debt to AA+.
DON EMMERT / AFP PHOTO
Tourists pass in front of Standard & Poor’s headquarters in New York. On 5 August S&P downgraded US debt to AA+.
DON EMMERT / AFP PHOTO

ON 5 AUGUST 2011, the United States-based credit rating agency Standard & Poor’s (S&P) downgraded the long-term debt issued by the US Treasury from a AAA rating to AA+. The financial services industry in the US and the credit rating agency have long shared a symbiotic relationship, and this was the first time that any estrangement crept to the surface. Predictably, like all relationships gone sour, a sense of betrayal, recrimination and defensiveness lingers in the air.

What does the credit rating agency’s downgrade of the US mean for India? Not much—in the short run. A global mistrust of S&P ratings is part of an enduring sense that the three major ratings agencies betrayed just about everyone. In the end, however, India is left with few options.

There are four principal critiques of S&P that buttress this sense of betrayal.

Keywords: credit rating debt downgrade USA Treasury global economy market capital erosion
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