‘Sovereign rating profile to be based on post-poll Budget’
Budget will offer guidance on medium-term outlook: Fitch
Pre-election spending has led to fiscal slippage by a modest margin but the sovereign rating profile of India would be evaluated based on the medium term outlook in the post-election Budget, Fitch Ratings said.
Finance Minister Piyush Goyal on Friday presented the Interim Budget for 201920 in which he announced a scheme under which farmers holding up to two hectare of land would get ₹6,000 in annual payout — a move intended to benefit about 12 crore farmers.
However, there was a 0.1% slippage in the fiscal deficit estimate for the current fiscal. It was revised to 3.4% from the budgeted 3.3%. For the next fiscal, fiscal deficit has been pegged at 3.4% of GDP, up from 3.1% as per the fiscal consolidation roadmap outlined earlier.
Fitch Ratings head of AsiaPacific Sovereigns, Stephen Schwartz, said the Interim Budget was largely as anticipated, with pre-election spending pressures giving rise to a second consecutive year of fiscal slippage by a modest margin, thereby delaying plans to reduce the high general fiscal deficit and debt burden.
“Longer term fiscal trends are more important to the sovereign rating profile, and we will evaluate these in the context of the post-election Budget, which should provide additional guidance on the medium-term outlook,” he said. In November last year, Fitch had retained sovereign rating for the country at ‘BBB-’, the lowest investment grade, with a stable outlook.
Fitch said a weak fiscal position continues to constrain ratings and there were significant risks to macroeconomic outlook.