Managing deficit in '10 biggest hurdle: Moody's
The ability to manage fiscal deficit will be the government’s biggest challenge in 2010, according to rating agency Moody’s Investors Service.
“India is poised for a cyclical recovery. Moving forward in 2010, managing the fiscal deficit would be the government’s biggest challenge. The fiscal deficit does not pose any immediate risk, but we continue to monitor it closely,” according to Jennifer Elliott, group managing director, Asia-Pacific, Moody’s Investors Service.
The Budget 2009-10 has projected a gross government borrowing of Rs 4.51 lakh crore for the current financial year, about Rs 89,000 crore more than what was forecast in the Interim Budget.
The pace and sustainability of policy and structural reforms, particularly pertaining to the opening up of the economy, would also be factored into the sovereign rating outlook for India, which at present was stable, she said.
“One of the issues, which was beneficial to India, was that it was not an exposed economy and was driven more by domestic demand. This has protected India from the global financial crisis,” she said, adding that the country could see a faster recovery than Asian nations dependent more on external trade. On the state of Indian capital markets, Elliott said, “During the financial crisis, we saw a shift towards domestic market issuances in Asian markets as the cross-border market slowed down. We did not see the same surge in the Indian capital market, because the bond market was not that developed.”
The emergence of bond markets in India might play a significant role in the development of the Indian capital markets, she said. Moody’s is expected to maintain a stable outlook on India’s sovereign rating in the short term, spanning over 12-18 months, unless a significant event occurs.
“We are looking for opportunities, but they are limited at present. It is certainly a good time for investment, but there are not many willing sellers,” said Robert Fauber, senior vice-president, corporate development, Moody’s Corporation. Moody’s holds about 29 per cent stake in domestic rating agency Icra.