Moody's doubts about achieving high revenue and disinvestment targets

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New delhi date. 01 February 2021, Monday

Despite a higher-than-expected fiscal deficit, Moody's Investor Service has remained silent on the country's sovereign rating, raising doubts about achieving higher revenue and disinvestment targets projected in the budget.

In the budget presented to Finance Minister Nirmala Sitaram, the fiscal deficit is projected to be 3.50 per cent of GDP at the end of the current financial year and 8.50 per cent for the next financial year. The fiscal deficit for the current financial year is projected to be seven per cent.

A plan has been announced to raise Rs 15 lakh crore from the market in the next financial year. In addition, the target is to raise Rs 1.5 lakh crore through disinvestment. The Fiscal Responsibility and Budget Management Act will be amended to keep the fiscal deficit at 7.50 per cent of GDP by FY 205-2.

The fiscal deficit target of 6.50 per cent in the next financial year is an attempt to balance growth and moderate deficits, but it is doubtful that the target of raising revenue through taxes and raising assets through sales of assets will be achieved, Moody's said in a report. .

The option to reduce spending without further weakening growth is limited and GDP growth remains important to reduce the fiscal deficit in the future. Overall, this budget highlights the challenges facing Corona in stabilizing the debt level. The debt burden of the Government of India is significantly higher than the average debt of its rival countries with a BAA à«© sovereign rating.

The proposal would be a credit rating for banks that have announced plans to sell their shares as it would reduce their support for the government.

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