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Informist, Tuesday, Jul 23, 2024

 

--Fitch:India FY25 Budget shows firm commitment to deficit reduction 

--Fitch: India FY25 Budget keeps eye on growth with capex push 

--Fitch: India FY25 Budget highlights clear policy continuity 

--Fitch: India govt put bulk of RBI surplus to fisc deficit reduction 

--CONTEXT: India FY25 fisc gap aim 4.9% of GDP vs 5.1% interim aim 

--Fitch: India's FY25 fiscal gap aim of 4.9% of GDP looks achievable 

--Fitch: India's FY25 nominal GDP growth view tad less than our view 

--CONTEXT: India Budget today pegged FY25 nominal GDP growth at 10.5% 

--Fitch:India govt's recent fiscal outperformance adds to credibility 

--Fitch: India likely to meet FY26 aim of below 4.5% of GDP fisc gap 

--Fitch:Expected more clarity on India medium-term fisc mgmt in Budget 

--Fitch:Public fin metrics relative weakness in India credit profile 

--Fitch: Sustained fisc consolidation to boost India's credit profile 

 

NEW DELHI – The government's sustained focus on fiscal consolidation in the Union Budget for 2024-25 (Apr-Mar), presented today, is supportive of India's credit profile, Fitch Ratings said. The Budget lowered the fiscal deficit target for the current year to 4.9% of GDP from 5.1% of GDP pegged in the Interim Budget.

 

"Today's 2024-25 Budget demonstrated the government's ongoing firm commitment to deficit reduction, while keeping an eye towards growth by maintaining its capex (capital expenditure) push," Fitch said. "In all, the Budget highlighted clear policy continuity during the NDA (National Democratic Alliance) government's new term."

 

The government used the bulk of the surplus transfer by the Reserve Bank of India to lower the fiscal deficit than to accommodate new spending, Fitch said. "The new FY25 deficit target is also below the 5.4% of GDP we forecast when we last affirmed India's 'BBB-' rating with a stable outlook in January 2024," the agency said.

 

Fitch said that this year's fiscal deficit target looks achievable because of the macroeconomic assumptions made by the Budget, including the nominal GDP growth projection of 10.5%, which is "modestly" lower than the rating agency's own forecast. "Further, the government’s recent record of achieving or outperforming its deficit targets has improved its fiscal credibility."

 

The government is likely to achieve its target of lowering the fiscal deficit to below 4.5% of GDP by 2025-26, Fitch said. "However, the Budget did not provide any additional clarity on the medium-term fiscal management objectives and targets, which is something we thought may have been forthcoming at the onset of the new term," it said.

 

India's public finances remain a relative weakness in its credit profile as the fiscal deficit, interest-to-revenue, and debt ratios are still higher than in peer countries, Fitch said. "Sustained fiscal consolidation, which supports a downward trajectory in the government debt ratio over the medium term would be supportive of India’s credit profile, particularly when combined with the current positive momentum on macroeconomic performance and external finances," it said.

 

"We will continue to assess the impact the gradual improvement in the fiscal outlook will have on the medium-term debt trajectory as a key factor in our ongoing monitoring of India's rating," the agency said.  End

 

Reported by Shubham Rana

Edited by Rajeev Pai

 

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