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 9.50% of GDP at the end of the current financial year and 6.80% for the next financial year. The fiscal deficit for the current financial year is projected to be 7%.
It plans to raise Rs 12 lakh crore from the market in the next financial year. In addition, a target of Rs 1.75 lakh crore has been set for disinvestment. The Fiscal Responsibility and Budget Management Act will be amended to keep the fiscal deficit at 4.50% of GDP by FY 2025-26.
The fiscal deficit target of 6.80% for 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 money through the sale of assets will be achieved, according to a Moody's 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 BAA3 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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