India’s decision to slightly lower its fiscal deficit target for 2019/20 is a step in the right direction but will be challenging to achieve, a Moody’s analyst said on Friday after the government announced its budget.
India’s finance minister said the government would cut its fiscal deficit target to 3.3% of gross domestic product (GDP) for the year ending March 2020, from 3.4% set in February, and said it would achieve 3% by March 2021.
“I think overall it seems like there is some support in the budget to address the sluggish growth in the economy and that’s going to make achieving a tighter fiscal deficit challenging,” said Gene Fang, associate managing director, sovereign risk group, Moody’s Investors Service.
“Despite the lower target we did pick up a lot of emphasis on support measures especially for low-income and farm workers and also some tax cuts in there,” Fang said.
It also remained to be seen how much the target depends on one-off revenue such as divestments, he said.
He said the budget announcements did not change the rating agency’s stance on India. Moody’s rates India at “Baa2” with a “stable” outlook.