“India’s debt as a percentage of GDP has remained constant for the past two or three years. And the fiscal deficit is in control” — Finance Secretary S Narayan, reacting to the Standard 038; Poor’s downgrade

Stop comparing India with India, and compare it instead with its peer group in south-east Asia, and the picture that emerges is dramatically different from what Narayan is painting.

In 1999, according to the World Bank’s World Development Indicators, India’s debt-to-GDP ratio was 53.4 per cent this is the figure Narayan’s referring to. Yet, that of Thailand was 20.8, Korea 10.4, and China a mere 12.7. Naturally, the amount spent by these countries on repaying their debt is much lower than that for India see graphic. To that extent, their economies are less fragile than India’s.

Pakistan, our not-so friendly neighbour, however, comes in good stead here — its debt-to-GDP ratio in 1999 was a whopping 79 per cent!

With the government pre-empting so much money, naturally, India’s savings rates are among the lowest in the region — Thailand’s savings rates, even post-crisis, is around 31 per cent as compared to India’s 21.4. The figure for Malaysia is a whopping 46.7 per cent.

Malaysia, in fact, is perhaps the best of the lot, with most of its indicators registering an improvement — not surprisingly, while India’s ratings were downgraded yesterday, Malaysia’s were upgraded from ‘BBB’ to ‘A-2’. Others, like Korea another winner yesterday, though hit badly by the south-east Asian crisis, have made a dramatic recovery as well.

As a result of cleaning up its banking system, foreign direct investment in Korea rose from 1.78 bn in 1995 to a whopping 9.28 bn in 2000.

Essentially, all south-east Asian countries compressed their economies dramatically during the Asian crisis, closed down bankrupt firms and banks — as a result, their economies look in comparatively good shape today.

India, it is true, didn’t suffer as much, but then it’s economy hasn’t got in shape either.