Populist Measures To Be Avoided, Focus To Be On Consolidation: Fitch

The Interim Finance Minister Piyush Goyal would be tabling the interim budget 2019 in the Parliament shortly. And as per the global rating agency, the focus in the last budget of the Modi led government should be on fiscal consolidation as any deviation with populist measures will mean another year of fiscal slippages for the Indian economy.

Higher pre-election spending could risk a second consecutive year of fiscal slippage relative to the government's targets and would further delay plans to reduce the high general government fiscal deficit and debt burden," it noted.

The agency highlighted that populists in order to woo voters spending would further put a pressure on fiscal deficit that is accumulating higher due to shortfall in revenue.

"We believe the central government may still be able to meet its fiscal deficit target of 3.3 per cent of GDP for FY19, which would help support its fiscal credibility, although this may be achieved by deferring capital expenditure and postponing bill payments until after March," it added. And for the sovereign rating, the longer term trends hold far more importance.

Also, the agency is of the view that the Interim Budget 2019 may reflect the reform direction the government may take up in its probable next term.

The rating agency's base-case scenario expects the sovereign debt may remain near to 70 per cent of GDP in the coming years. The number nearly double the 'BBB' median of 36.0 per cent and continues to constrain India's sovereign rating (BBB-/Stable).

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