Nifty99000 100%

Sensex99000 100%

Article rating: 5.0
Article rating: 5.0
Article rating: 5.0
Article rating: No rating
Article rating: No rating
Article rating: No rating
Article rating: No rating
Article rating: No rating
Article rating: No rating
Article rating: No rating
Article rating: No rating
Article rating: 4.7
Article rating: 3.7
Article rating: 3.7
Article rating: No rating
Article rating: 4.0


Slight slippage in fiscal deficit to have no overall material impact: Moody’s

Author: IANS/Monday, February 5, 2018/Categories: Economy

Slight slippage in fiscal deficit to have no overall material impact: Moody’s

New Delhi, Feb 5 - Echoing Finance Minister Arun Jaitley's description of Budget 2018-19 combining fiscal prudence with growth needs, US credit rating agency Moody's on February 5 said the "slight" slippage in fiscal deficit for the current year would have no overall material impact.

Prsenting his last full budget before the general elections early next year, Jaitley made a significant announcement of fiscal slippage with implications for pushing inflation, revising upwards the government's fiscal deficit target for 2017-18 to 3.5% of the GDP, or the equivalent of Rs 5.95 lakh crore. 

The higher target came in place of the 3.2% -- or Rs 5.46 lakh crore -- for the current fiscal announced earlier. 

"This slippage has no material impact on India's overall fiscal strength although some measures such as the rise in Minimum Support Prices (MSPs) and ambitious GST revenue targets could result in some further slippage," Moody's Investor Service said in a statement. 

"Slight slippage in the budget deficit targets has no material impact on the country's overall fiscal strength and is in line with Moody's expectations."

In the budget, Jaitley announced that the MSP for notified kharif crops will be 1.5 times the input cost, and also stepped up total budgetary allocation for the sector for next fiscal by about 5%. 

He also said that a one month loss in revenue because of GST made up a substantial part of the shortfall, elaborating that the revenues for the coming March from the Goods and Services Tax (GST) implemented from last July would only be available in April after the end of the current fiscal.

"The revised fiscal consolidation path is modestly shallower than the previous roadmap, but does not fundamentally alter India's overall fiscal strength," said Moody's Vice President William Foster.

"However, some ambitious revenue assumptions and uncertainty about some spending items could result in a shortfall to overall fiscal consolidation," he added. 

The American financial services multinational also said the government's medium-term target to reduce its debt-to-GDP ratio to 40% is supportive of India's sovereign credit profile.

The formal adoption of key recommendations by the Fiscal Responsibility and Budget Management Committee is "credit positive", according to Moody's. 

These include the objective to bring down the central government debt-to-GDP ratio to 40%, from the current level of 50%, and use of the fiscal deficit target as the government's key operational parameter, it said.

The rating agency feels that the budget benefits corporates, including the infrastructure and insurance sectors.

"Budget is broadly positive for corporates. Higher rural spending, lower corporate taxes and relaxing restrictions on the ability of financial intermediaries to invest lower rated
corporate bonds are credit positive for most corporates," the statement said. 

"Higher custom duties on some products will encourage domestic production over the longer term but may slow downnear-term growth for industries which depend on these imports," it added. 

Infrastructure will benefit from a boost in spending, and the government's continued focus on public investment will also help galvanise capital spending, Moody's said.

Besides, the insurance market will benefit from the launch of a national health scheme and the merger, as well as listing of three state-owned insurers.

In this connection, rebutting criticism of Budget 2018-19 pandering to the farm sector in a pre-election year at the expense of the middle class and the corporate sector, Jaitley on Friday showed how his latest budget exercise is actually designed to boost overall economic growth with the help of all segments.

Interacting here with corporate leaders following his budget presentation, Jaitley said that a stressed agriculture sector was not in India's interest, indicating thereby that boosting rural demand is a key in helping the Indian industry currently burdened with massive leverage, while banks struggle with their accumulated bad loans.

Print Rate this article:
No rating

Number of views (347)/Comments (0)

Kavita Giridhar Mallya


Other posts by IANS
Contact author

Leave a comment

Add comment



Ask the Finapolis.

I'm not a robot
Dharmendra Satpathy
Col. Sanjeev Govila (retd)
Hum Fauji Investments
The Finapolis' expert answers your queries on investments, taxation and personal finance. Want advice? Submit your Question above
Want to Invest



The technical studies / analysis discussed here can be at odds with our fundamental views / analysis. The information and views presented in this report are prepared by Karvy Consultants Limited. The information contained herein is based on our analysis and upon sources that we consider reliable. We, however, do not vouch for the accuracy or the completeness thereof. This material is for personal information and we are not responsible for any loss incurred based upon it. The investments discussed or recommended in this report may not be suitable for all investors. Investors must make their own investment decisions based on their specific investment objectives and financial position and using such independent advice, as they believe necessary. While acting upon any information or analysis mentioned in this report, investors may please note that neither Karvy nor Karvy Consultants nor any person connected with any associate companies of Karvy accepts any liability arising from the use of this information and views mentioned in this document. The author, directors and other employees of Karvy and its affiliates may hold long or short positions in the above mentioned companies from time to time. Every employee of Karvy and its associate companies is required to disclose his/her individual stock holdings and details of trades, if any, that they undertake. The team rendering corporate analysis and investment recommendations are restricted in purchasing/selling of shares or other securities till such a time this recommendation has either been displayed or has been forwarded to clients of Karvy. All employees are further restricted to place orders only through Karvy Consultants Ltd. This report is intended for a restricted audience and we are not soliciting any action based on it. Neither the information nor any opinion expressed herein constitutes an offer or an invitation to make an offer, to buy or sell any securities, or any options, futures or other derivatives related to such securities.

Subscribe For Free

Get the e-paper free