New Delhi: Fitch Ratings on Monday said high fiscal deficit and lack of clarity on consolidation plans Budget Add risk to your estimate of reducing India’s debt-to-gross domestic product (GDP) ratio.
The global rating agency said in a statement that the extent to which planned higher capital expenditure (capital expenditure) supports GDP growth and offsets these risks is an important consideration for sovereign ratings.
Risks surrounding the stability of the downward debt trajectory were a key factor behind Fitch’s decision to maintain a ‘negative’ outlook on the sovereign when India’s ‘BBB-‘ rating was confirmed in November 2021.
“Higher deficits and continued lack of clarity on medium-term consolidation plans in India’s latest budget add to Fitch Ratings’ risk of a downward trajectory in government debt/GDP,” Fitch said.
The budget presented by the government on February 1 continued to emphasize support for development fiscal consolidationFitch said.
added that loss The target was “a little higher than we anticipated when we confirmed the ratings”.
The budget projected a revised deficit of 6.9 per cent of GDP for the fiscal year ending March 2022 (FY22), while Fitch had projected 6.6 per cent.
“The FY23 deficit of 6.4 per cent of GDP is also higher than our forecast of 6.1 per cent.
“Borrowing allowance for states, which was maintained at 4 per cent of GDP in FY13, keeping it above the pre-pandemic level of 3 per cent, poses further risks to our financial forecasts,” added this.
India’s public debt-GDP ratio stands at around 87 per cent in FY2011 (ending March 2021), well above the average of around 60 per cent for ‘BBB’-rated sovereigns.
“We revised India’s rating from negative to negative, stable in June 2020, partly due to our assumptions about the impact of the pandemic on public finance metrics.
“The government has little fiscal space to respond to potential shocks to growth at its current rating level,” Fitch said.
The global rating agency said in a statement that the extent to which planned higher capital expenditure (capital expenditure) supports GDP growth and offsets these risks is an important consideration for sovereign ratings.
Risks surrounding the stability of the downward debt trajectory were a key factor behind Fitch’s decision to maintain a ‘negative’ outlook on the sovereign when India’s ‘BBB-‘ rating was confirmed in November 2021.
“Higher deficits and continued lack of clarity on medium-term consolidation plans in India’s latest budget add to Fitch Ratings’ risk of a downward trajectory in government debt/GDP,” Fitch said.
The budget presented by the government on February 1 continued to emphasize support for development fiscal consolidationFitch said.
added that loss The target was “a little higher than we anticipated when we confirmed the ratings”.
The budget projected a revised deficit of 6.9 per cent of GDP for the fiscal year ending March 2022 (FY22), while Fitch had projected 6.6 per cent.
“The FY23 deficit of 6.4 per cent of GDP is also higher than our forecast of 6.1 per cent.
“Borrowing allowance for states, which was maintained at 4 per cent of GDP in FY13, keeping it above the pre-pandemic level of 3 per cent, poses further risks to our financial forecasts,” added this.
India’s public debt-GDP ratio stands at around 87 per cent in FY2011 (ending March 2021), well above the average of around 60 per cent for ‘BBB’-rated sovereigns.
“We revised India’s rating from negative to negative, stable in June 2020, partly due to our assumptions about the impact of the pandemic on public finance metrics.
“The government has little fiscal space to respond to potential shocks to growth at its current rating level,” Fitch said.
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