Moody's Flags Fiscal Slippage Risks For Indian Economy

In an interview on Sunday, the rating agency Moody's warned of the possibility of fiscal slippage as a result of lower-than-anticipated government revenues for the current fiscal year.

In an interview with PTI, Moody's Investors Service Associate Managing Director Gene Fang said India has a relatively high level of general government debt at around 81.8 per cent of GDP for 2022-23, and low debt affordability.

India, Fang said, has a high growth potential and its credit strengths include a stable domestic financing base for government debt, as well as a sound external position.

Fang said, "We expect India's growth to come in around 6-6.3 per cent in the first quarter of the current fiscal year, which remains relatively flat from the 6.1 per cent recorded in the final quarter of fiscal 2022-23".

Fang added, "While household demand is likely to see an improvement given the moderation in both headline and core inflation readings, lagged effects of higher interest rates pose some risks on gross fixed capital formation".

Gross Fixed Capital Formation, or GFCF, is a measure of economic investment.

Fang said as a "Baa3"-rated sovereign, India's assets lie in its huge and differentiated economy with a high development potential, obvious in the somewhat solid development figure this year despite the weaker global economic outlook.