New Delhi: Financial conditions of India will remain weaker than other country’s economy in the coming course also even if the economic consolidation will continue, said Moody’s Investors Service on Tuesday regarding India’s budget for next term.
“Even if the budgetary consolidation continues, India’s fiscal metrics will remain weaker than rating peers in the near term, because of the relatively high level of India’s state and central government deficits and debt,” Moody’s said in a report.
“The importance of the upcoming budget lies in its message on the government’s fiscal consolidation plans,” the American agency said.
“But at around 63.8 percent of GDP, India’s government debt ratio remains high compared to the median of 49.5 percent for Baa3-rated peers. Without continued fiscal consolidation, India’s government finances will continue to compare poorly to peers,” it added.
The economic shortage of GDP touched 4.1 % in 2015-16, as the government planned it at 3.9 % and 3.5 % of GDP for this fiscal and the next, respectively.
According to report, “The budget will reveal whether and how the government intends to maintain the trend of modest fiscal deficit reduction of the past few years’’.
Structural factors weaken the fiscal, said Moody. Around $1,700 lower per capita incomes limit the government’s tax base and increase pressure of financial support and spending on development.
“Moreover, interest payments absorb almost a fifth of Indian government revenues, a consequence of high debt, which we estimate at 63.8 percent of GDP in fiscal 2016, down from 83.1 percent in fiscal 2005. This restricts the government’s fiscal flexibility,” said Moody.
India’s moving growth rate perform better than the autonomous, was accompanied last year because of weak corporate profitability with pricing power staying low and by overcome rural demand payable to poor monsoons, said Moody while looking at India’s current environment growth which creates problems in fiscal consolidation.
“For instance, despite a robust GDP growth above 7 percent in 2015, rural demand and corporate profitability remained subdued, weighing on tax revenues,” it said, adding that government tax revenue growth has cooled.
Moody’s said that India’s economic consolidation process such as fall in corporate profits or expenditure growth or increase in subsidy costs remains at risk to economic shocks, on the basis of trends in revenues and expenditures over the last five years.
“Therefore, fiscal improvements are likely to be limited in the near term. Whether they occur over the medium term will depend on the successful implementation of policy measures that expand the revenue base and/or curtail expenditure commitments,” Moody’s said. (IANS)Click here for reuse options!
Copyright 2016 NewsGram