Budget 2019: Global Rating Firms On Fiscal Deficit, In Line Or Off Target?
While S&P Global Ratings found Budget 2019 in line with the expectations, Moody’s said the new expenditures announced ahead of elections with no new policy to increase revenue will put pressure on the fiscal deficit.
As the centre’s total expenditure is projected to rise 13.3 percent to Rs 27.84 lakh crore, credit rating agency S&P said the number was “largely in line” with the expectations. “Budget at first glance suggests little change in the government’s medium-term fiscal trajectory,” Andrew Wood, an analyst at S&P Global Ratings, said in a statement. “The government’s projections suggest a stabilisation of the central government deficit, in line with its estimates for the full year 2018-19 outturn.”
Finance Minister Piyush Goyal announced a slew of sops for farmers and middle-class taxpayers in the interim budget. The move to woo voters ahead of elections could balloon the government’s expenditure bills. That came as government missed its fiscal deficit target for the second straight year. It revised the number for FY19 to 3.4 percent compared with the budget estimate of 3.3 percent.
“We view this continued slippage as credit negative for the sovereign,” Gene Fang, associate managing director, sovereign risk group at Moody’s Investors Service, said in a statement. “India’s high debt burden remains its biggest credit challenge and is not expected to diminish rapidly.”
Ongoing fiscal slippage from targets over the past two years, and our expectation that the government will face challenges meeting its target again this coming fiscal year does not bode well for medium term fiscal consolidation.”Gene Fang, Associate Managing Director (Sovereign Risk Group), Moody’s