Weak growth prospects for India will complicate the government’s fiscal consolidation efforts, weighing on the sovereign’s credit quality, Moody’s Investors Service said Tuesday.
The 2019-20 Budget presented in Parliament last week projected to contain fiscal deficit at 3.3 per cent of GDP, lower than 3.4 per cent estimated in the interim Budget. It also projected a more gradual decline in government debt.
“Weak growth prospects for India (Baa2 stable) willcomplicate the government’s fiscal consolidation efforts, weighing on thesovereign’s credit quality,” Moody’s said in a statement.
The rating agency said delivering on fiscal consolidationand raising incomes will be extremely challenging for India’s authorities,particularly since growth is likely to remain weak over the coming year,Moody’s said.
It said budget announcements are credit positive for publicsector banks, non-bank finance companies (NBFCs), infrastructure sector,property developers, some domestic producers and securitisation transactions.
The Rs 70,000 crore capital infusion into public sectorbanks and a temporary credit guarantee facility to alleviate tight liquidityfor NBFCs are measures that are credit positive for the relevant entities andshould encourage the flow of credit to the economy and support growth, Moody’ssaid.
The hike in customs duties on certain imported products willincrease the competitiveness of domestic producers, while new incentives forthe purchase of affordable homes will be credit positive for Indian property developers,it added.