Budget modestly credit positive for India: Moody's

Tags: News
Rating agency Moody's today said the budget 2014-15 has outlined steps to support faster economic growth, but absence of detailed implementation plan makes it modestly credit positive for India.

"Unless the budget is followed by a more specific implementation plan, as well as additional measures to address macroeconomic imbalances, its credit effect will be modest," said Moody's Investors Service Senior VP Atsi Sheth.

Finance Minister Arun Jaitley presented his maiden budget last week in which he vowed to contain fiscal deficit at 4.1 per cent this year and lower it to 3 per cent by 2016-17.

"A smaller fiscal deficit would be credit positive since India's weakening public finances have fuelled inflation, raised domestic interest rates and heightened macroeconomic imbalances, constraining sovereign credit quality," she said.

The Moody's credit outlook report said the Budget did not outline specific revenue and expenditure measures to shrink the deficit, suggesting that various options are still under consideration.

"Lack of detail makes it difficult to assess the feasibility and sustainability of the fiscal consolidation effort," it added.

The budget includes measures to support faster economic growth, such as allowing greater foreign direct investment in insurance and defence, increasing spending on infrastructure, and introducing tax incentives for savings and investment.

"These policies are credit positive for the corporate and infrastructure sectors. However, their effect on overall GDP growth will be muted without a decline in inflation, interest rates and regulatory constraints on private investment," Seth said.

Moody's assigns a 'Baa3' rating on India, with a stable outlook.

India's economic growth is expected to improve to between 5.4-5.9 per cent in the current fiscal, from 4.7 per cent in 2013-14.

Post new comment

E-mail ID will not be published
CAPTCHA
This question is for testing whether you are a human visitor and to prevent automated spam submissions.

EDITORIAL OF THE DAY

  • Sebi must not exempt listed SMEs from its mandatory disclosure norms

    The Securities and Exchange Board of India (Sebi) has amended clause 49 of the listing agreement, which lays down the obligation of companies toward t

FC NEWSLETTER

Stay informed on our latest news!

INTERVIEWS

GV Nageswara Rao

MD & CEO, IDBI Federal Life

Timothy Moe

Goldman Sachs

Chander Mohan Sethi

CMD, Reckitt Benckiser India

COLUMNIST

Arun Nigavekar

Skills education can boost industry

India’s manufacturing industry matters a great deal for the economic ...

Rajgopal Nidamboor

How synchronous empathy helps us

All of us are in an undulating ‘hypnotic’ state. A ...

Gautam Gupta

In fashion, why quality must exceed quantity

Every time there’s a fashion week in India, my friends, ...

INTERVIEWS

William D. Green

Chairman & CEO, Accenture