 "Fiscal responsibility and federalism")
India will face challenges in sticking to the fiscal consolidation roadmap as the expected revenues may not be fully realised and subsidy cuts may be delayed, Standard & Poor's Ratings Services said.
"Although we expect the administration to pursue its stated fiscal consolidation programme, we foresee that planned revenues may not fully materialise and subsidy cuts may be delayed," S&P Ratings Services India Sovereign Analyst Kyran Curry told PTI.
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In the Budget 2015-16 government deviated from the fiscal consolidation path, postponing fiscal deficit targets by a year. The original target was to bring it down to 3.6% of the GDP in 2015-16 but it has been postponed by a year. Now, government is targeting 3.9% in the current fiscal and 3.5% by next year.
"India's fiscal challenges reflect both revenue under performance and constraints on expenditure (mainly related to subsidies for food, energy, and fertilisers)," Curry said.
However, he said that in the medium term, S&P expects improved fiscal performance primarily from revenue-side improvements, brought about by the planned introduction of the Goods and Services Tax (GST) and administrative efforts to expand the tax base.
While RBI Governor Raghuram Rajan has cautioned against the fiscal profligacy to spur growth, Finance Minister Arun Jaitley has remained non-committal on fiscal slippages.
Jaitley has said there are pros and cons of pushing growth by higher public spending and he would take a view on the issue at the time of Budget. The Budget for 2016-17 would be unveiled on February 29.
