Moody’s expects India’s fiscal position to remain weak

NEW DELHI: Moody’s Investors Service says India’s weak fiscal position (negative Baa3) will remain a major credit challenge in 2021.
According to Moody’s, the outlook for budget consolidation remain low, particularly in view of the governmentmixed results of the implementation of revenue raising measures.
Although the government has not provided an explicit roadmap for medium-term fiscal consolidation, according to its Budget In his speech, he targets a budget deficit of 4.5% of GDP by fiscal year 2026, which equates to an average annual deficit reduction of around 0.5% of GDP over four years.
Given India’s very high debt burden, this gradual pace of consolidation will prevent any significant strengthening of the government’s fiscal position in the medium term, unless nominal GDP growth resumes sustainably to reach rates much higher than those recorded historically, Moody’s said.
According to Moody’s, the central government budget deficit for fiscal years 2021 and 2022 is expected to be lower than forecast, supported by stronger revenue generation in the fourth quarter of fiscal 2021 and higher nominal GDP growth in fiscal year 2021. fiscal year 2022.
“Nonetheless, large budget deficits combined with lower real and nominal GDP growth over the medium term will limit the government’s ability to reduce its debt burden,” said Gene Fang, associate managing director of Moody’s.
the Indian subsidiary of Moody’s, ICRA limited, meanwhile, said he expects a significant rebound in India’s economic growth in the fiscal year ending March 31, 2022 (fiscal 2022) thanks to increased central government spending and a recovery. , although uneven, consumption.
Overall, ICRA projects real and nominal GDP to grow by 10.5% and 14.5%, respectively, in fiscal 2022 as the pandemic recedes.
According to the ICRA, recent economic data points to an acceleration of the economic rebound in the third quarter of fiscal 2021, with most of the tracked indicators registering improvements compared to the period of the previous year. Data for the current quarter also suggests stable economic momentum.
Meanwhile, the short-term outlook for the agricultural sector is bright, according to the ICRA assessment, with many regions recording healthy rainfall and reservoir levels, an increase in Rabi crop area and trends. healthy supply.
CIFAR expects the recovery in consumption to be differentiated by age and income groups in FY2022. The pent-up demand for discretionary activities like travel could lead to more income groups. high to spend more on recreation after the second quarter of fiscal 2022 once vaccines are more widely distributed. This would give a boost to economic activity in the second half of FY2022 and FY2023.

About Lucille Thompson

Check Also

Can you get a jobless loan? Here’s what you need to know

Getting a loan can help you in many ways when you are in a tough …