New Delhi, July 07: Global rating agency Moody`s on Tuesday expressed concern on India`s high fiscal deficit projected at 6.8 per cent for 2009-10 and cautioned that the situation may become complicated in the absence of measures like clear road map for disinvestment and structural reforms.
The agency said that cyclical deterioration in the
country`s public finances could leave the authorities
ill-equipped to tackle any external shocks which may happen in
the future.
"We remain cautious about how the government can hope to
avoid complicating monetary management, without advancing
structural reforms or re-prioritising expenditures or pushing
for disinvestments more vigorously," Moody`s Vice President -
Senior Analyst (Sovereign Risk Group) Aninda Mitra told PTI in
an e-mailed statement from Singapore.
The agency noted the government has the political scope
to respond to emerging challenges. The Congress-led UPA
coalition was voted back to power with a thumping majority.
"We also recognise that this government has the political
scope to formulate a robust response to emerging challenges
and this is also incorporated into the stable outlook we
maintain on the sovereign ratings," Moody`s said.
Presenting the Budget yesterday, Finance Minister Pranab
Mukherjee said that fiscal deficit is expected to touch 6.8
per cent in 2009-10.
Regarding the Budget, Moody`s said it is growth-oriented
and contains a slightly larger than expected "headline deficit
number" but the same is broadly consistent "with near-term
stability in the government`s debt trajectory".
The government has already come up with three fiscal
stimulus packages in the past few months to boost economic
growth.
Moody`s said India`s overall Budget is consistent with
the agency`s "stable outlook on Baa3 foreign currency and Ba2
(non-investment grade) local-currency sovereign ratings".
According to the agency, many of the shortcomings in
overall expenditure management and high debt overhang, are
reflected in non-investment grade rating of Ba2 for the
nation`s local currency.
"This is because-- relative to other large emerging
markets-- India`s institutional commitment, backed by
socio-economic consensus, to reduce the debt overhang has been
weak," it noted.
Moody`s said that it is looking for policy signals and
supporting actions that would "better assure about medium-term
appropriateness of the policy framework and an ability to also
meet un-anticipated shocks".
Bureau Report
