India faces continued fiscal challenges, regardless of decrease deficit goal: Moody’s

New Delhi: Weak progress prospects for India will complicate the federal government’s fiscal consolidation efforts, weighing on the sovereign’s credit score high quality, Moody’s Investors Service mentioned on Tuesday.

The 2019-20 Budget introduced in Parliament final week projected to comprise fiscal deficit at 3.Three % of GDP, decrease than 3.four % estimated within the interim Budget. It additionally projected a extra gradual decline in authorities debt.

“Weak growth prospects for India (Baa2 stable) will complicate the government’s fiscal consolidation efforts, weighing on the sovereign’s credit quality,” Moody’s mentioned in a press release.

Representational picture. Reuters.

The ranking company mentioned delivering on fiscal consolidation and elevating incomes will likely be extraordinarily difficult for India’s authorities, notably since progress is prone to stay weak over the approaching yr.

It mentioned funds bulletins are credit score optimistic for public sector banks, non-bank finance corporations (NBFCs), infrastructure sector, property builders, some home producers and securitisation transactions.

The Rs 70,000 crore capital infusion into public sector banks and a short lived credit score assure facility to alleviate tight liquidity for NBFCs are measures which can be credit score optimistic for the related entities and will encourage the movement of credit score to the economic system and help progress, Moody’s mentioned.

The hike in customs duties on sure imported merchandise will improve the competitiveness of home producers, whereas new incentives for the acquisition of inexpensive properties will likely be credit score optimistic for Indian property builders, it added.

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