For Quick Alerts
ALLOW NOTIFICATIONS  
For Daily Alerts

Fitch, S&P Flag India's High Fiscal Deficit, Slow Consolidation

By Staff
|

On Tuesday, rating agencies flagged India's higher-than-expected fiscal deficit figures and a gradual pace in consolidation. Wider fiscal deficits and a more gradual pace of consolidation will lift the Indian government's debt and pressure its sovereign ratings, Fitch Ratings said, cautioning that the fiscal firepower is limited due to a high debt ratio.

 

Fitch, S&P Flag India's High Fiscal Deficit, Slow Consolidation

"The budget forecasts wider near-term deficits of 9.5% of GDP in FY21 and 6.8% in FY22 and a more gradual pace of consolidation than we had previously anticipated, reaching 4.5% only by FY26," said Jeremy Zook, director, Asia-Pacific sovereigns, at Fitch Ratings.

"The prospect of consolidation from these heights, while maintaining a significant degree of support for the economy, poses a stout challenge to India's policymakers," said S&P in a report.

Both S&P and Fitch noted that the increased capital expenditure is expected to support economic recovery, which is likely to gather more pace as COVID-19 cases decline amid the rollout of the vaccination programme.

On Monday, Finance Minister Nirmala Sitharaman said the current year fiscal deficit will touch 9.5% of GDP, much higher than the budgeted 3.5% and sharply above analyst estimates of around 7%.

The government has also projected a deficit of 6.5% for the upcoming fiscal year 2021-22, and said it would reach 4.5% only by fiscal 2025-26.

Fitch had placed India's "BBB-" rating on a negative outlook in June 2020 due to the pandemic's impact on growth prospects and the challenges of the high debt burden.

Read more about: fiscal deficit fitch s ampp
Story first published: Wednesday, February 3, 2021, 11:12 [IST]
Company Search
Get Instant News Updates
Enable
x
Notification Settings X
Time Settings
Done
Clear Notification X
Do you want to clear all the notifications from your inbox?
Settings X