Delayed fiscal consolidation? No problem, doesn't change India's rating, says Moody's

New Delhi: US-based think-tank Moody’s today said India’s sovereign rating will not be impacted by the delayed fiscal consolidation programme announced in the Budget 2015-16. Keen to accelerate economic growth, the government has said that it would achieving the 3 per cent fiscal deficit target by 2017-18 as against earlier targeted 2016-17. “The measures in the budget…doesn’t change our view on India’s sovereign credit profile,” Moody’s Sovereign Ratings Analyst Atsi Sheth told PTI. [caption id=“attachment_2129675” align=“alignleft” width=“380”]  Reuters image[/caption]Moody’s has a ‘Baa3’ rating on India, with a stable outlook. The current rating is closest to junk status or below investment grade. Rolling out a new fiscal consolidation roadmap, Finance Minister Arun Jaitley yesterday had said that fiscal deficit would be brought down to 3.9 per cent of GDP in 2015-16, and then further to 3.6 per cent and finally to 3 per cent in 2016-17 and 2017-18, respectively. “The delayed reduction of the fiscal deficit to 3 per cent of GDP simply underscores our view because fiscal consolidation is proving difficult even as economic growth is accelerating and oil prices are benign,” Sheth said. While presenting the Budget for 2015-16 Jaitley had said the economic growth would be over 8 per cent next fiscal and double digit growth rate is feasible soon. Hence, he decided to delay to fiscal consolidation programme by a year to put in more funds in the economy to bolster growth. “The budget clearly prioritised growth over fiscal consolidation,” sheth said, adding, the budget contained several measures that are positive, such as clarity around GAAR, a simplification of the corporate tax regime and reiteration on introduction of GST. However, there was no significant reduction of current expenditures, and the fiscal roadmap announced last year was changed and fiscal consolidation delayed, she added. The Finance Minister had said that the Corporate Tax rate would be brought down to 25 per cent over four years and the Goods and Services Tax (GST) would be rolled out by April 2016. Besides, implementation of General Anti Avoidance Rules (GAAR) had been deferred by two years to April 2017. PTI