Oil Price Rise To Affect India's Fiscal Deficit: Moody's

The ailing rupee which has been suffering due to the dollar's upbeat trajectory is likely to weigh highly negative for India's fiscal deficit. And as per credit agency, it is estimated to surpass the estimated target of 3.3% for the ongoing financial year 2019.

This is anticipated as the oil conundrum and rising interest rate scenario will impact the country's budget as well as current account i.e. primarily the difference between exports and imports.

Moody in a report said, higher oil prices add to short term fiscal pressures, following cuts in Goods and Service tax on some items and relatively higher increase in minimum support prices for some crops. Also it added, We see risks that the deficit will be wider than budgeted.

For the current fiscal year, the government has budget a deficit of 3.3 of the GDP for the fiscal year ending March 2019. In the last ended quarter, the fiscal deficit has reached 68.7% of budget estimates.

In today's trade crude has again surged to $77 a dollar, this is likely to pressurize country's current account position. But it is unexpected to jeopardize India's external position and the gap will remain narrower in contrast to what it was 5 years ago.
Current account deficit shall also widen to 2.5% of the GDP in the FY ending 2019 as against 1.5% for the corresponding period a year ago.

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