India’s fiscal metrics to remain weaker than peers - Moody's
New Delhi: Days ahead of the Union budget, Moody’s Investors Service on Tuesday said India’s fiscal metrics will remain weaker than its peers in the near term even if finance minister Arun Jaitley was to stick to fiscal consolidation roadmap.
Jaitley, in his Budget 2016-17 on Monday, will reveal if the credit-positive five-year trend of narrowing budget deficits—from 6.5% of GDP in fiscal 2010 to 4.1% in fiscal 2015—will continue. He will also say if the government was on track to reduce deficits to 3.9% and 3.5% of GDP this fiscal year and the next, respectively.
Moody’s said the importance of the upcoming budget lies in its message on the government’s fiscal consolidation plans. The government’s fiscal deficit has reduced over the last five years, and this has supported the stabilization of government debt ratios. Without fiscal consolidation going forward, India’s government finances will continue to compare poorly to peers.
“Even if budgetary consolidation continues, India’s fiscal metrics will remain weaker than rating peers in the near term, because of the relatively high level of India’s state and central government deficits and debt,” Moody’s said. Based on the trends in revenues and expenditures over the last five years, Moody’s said the fiscal consolidation process remains vulnerable to economic shocks, such as a fall in corporate profits or consumption growth, or an increase in subsidy costs.
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