Slightly breaching fiscal deficit goals will have “no material impact” on India’s economic strength, global ratings agency Moody’s said on Monday. The statement came days after the Centre admitted that its fiscal deficit in 2017-’18 would exceed its target.
In the Union Budget for 2018-’19, which Finance Minister Arun Jaitley tabled in Parliament on Thursday, the government revised its fiscal deficit target for 2017-’18 to 3.5% of the Gross Domestic Product and for 2018-’19 to 3.3%. It had earlier aimed at 3.2% for 2017-’18 and 3% for 2018-’19.
Fiscal deficit is the difference between the government’s revenue and expenditure and indicates how much it may need to borrow. India’s fiscal deficit has been widening – by November 2017, the government had already exceeded its fiscal deficit target for the financial year.
However, Moody’s said the Budget strikes a balance between fiscal prudence and growth, PTI reported. The slight slippage from targets that Jaitley pegged is “in line with Moody’s expectations”, the agency said.
“The revised fiscal consolidation path is modestly shallower than the previous roadmap, but does not fundamentally alter India’s overall fiscal strength,” William Foster, a vice president at Moody’s, was quoted as saying.
The ratings agency expects the government to meet the deficit target for 2018-’19, but warned that some “ambitious revenue assumptions” and uncertainty about some expenses could result in a shortfall.
In November 2017, Moody’s upgraded India’s sovereign credit rating for the first time in nearly 14 years. It had said the government’s economic and institutional reforms would “enhance India’s high growth potential” over time.