Moody's projects India's fiscal deficit higher than expected
Rating agency Moody’s on Wednesday said India's fiscal deficit projections were higher than expected and slower consolidation would constrain its fiscal strength over the medium term.
India has budgeted a fiscal deficit of 9.5 per cent of GDP for the current fiscal ending March.
“We believe the final number could be lower, based on stronger revenue generation during the fourth quarter of fiscal 2020 (ending March 31, 2021),” Moody’s said in a note.
The fiscal deficit for 2021-22 fiscal beginning April 1 has been pegged at 6.8 per cent.
Moody’s vice-president and senior credit officer William Foster said while the headline deficit projections were larger than the agency expected, they reflected both credible budgetary assumptions and greater transparency than in past budgets.
“The budget’s focus on higher capital spending, financial sector reform and asset sales will help stimulate growth, but implementation risks remain and slower fiscal consolidation will constrain fiscal strength over the medium term,” Foster added.
According to the glide path for fiscal consolidation announced in the budget, the government plans to bring down the fiscal deficit to 4.5 per cent of the gross domestic product (GDP) by 2025-26 fiscal.
The US-based agency further said it expected India’s nominal GDP growth to rise to closer to 17 per cent in fiscal 2021, higher than 14.4 per cent projected in the budget.