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| Rising fiscal deficit a cause for concern: Moody's |
| Press Trust of India / New Delhi Jul 07, 2009, 17:08 IST |
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Global rating agency Moody's today expressed concern on India's high fiscal deficit projected at 6.8 per cent for 2009-10 and cautioned that the situation may become complicated in the absence of measures like clear road map for disinvestment and structural reforms.
The agency said that cyclical deterioration in the country's public finances could leave the authorities ill-equipped to tackle any external shocks which may happen in the future.
"We remain cautious about how the government can hope to avoid complicating monetary management, without advancing structural reforms or re-prioritising expenditures or pushing for disinvestments more vigorously," Moody's Vice President - Senior Analyst (Sovereign Risk Group) Aninda Mitra told PTI in an e-mailed statement from Singapore.
The agency noted the government has the political scope to respond to emerging challenges. The Congress-led UPA coalition was voted back to power with a thumping majority.
"We also recognise that this government has the political scope to formulate a robust response to emerging challenges and this is also incorporated into the stable outlook we maintain on the sovereign ratings," Moody's said.
Presenting the Budget yesterday, Finance Minister Pranab Mukherjee said that fiscal deficit is expected to touch 6.8 per cent in 2009-10.
Regarding the Budget, Moody's said it is growth-oriented and contains a slightly larger than expected "headline deficit number" but the same is broadly consistent "with near-term stability in the government's debt trajectory".
The government has already come up with three fiscal stimulus packages in the past few months to boost economic growth. Moody's said India's overall Budget is consistent with the agency's "stable outlook on Baa3 foreign currency and Ba2 (non-investment grade) local-currency sovereign ratings".
According to the agency, many of the shortcomings in overall expenditure management and high debt overhang, are reflected in non-investment grade rating of Ba2 for the nation's local currency.
"This is because — relative to other large emerging markets — India's institutional commitment, backed by socio-economic consensus, to reduce the debt overhang has been weak," it noted.
Moody's said that it is looking for policy signals and supporting actions that would "better assure about medium-term appropriateness of the policy framework and an ability to also meet un-anticipated shocks".
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