Tuesday, Jul 07, 2020 | Last Update : 04:26 PM IST

104th Day Of Lockdown

Maharashtra2119871152629026 Tamil Nadu114978665711571 Delhi100823720883115 Gujarat36858263231967 Uttar Pradesh2770718761785 Telangana2390212703295 Karnataka234749849372 West Bengal2212614711757 Rajasthan2026315965459 Andhra Pradesh200198920239 Haryana1750413335276 Madhya Pradesh1528411579617 Bihar12140901497 Assam11737743414 Odisha9526648648 Jammu and Kashmir84295255132 Punjab64914494132 Kerala5623334128 Chhatisgarh3207257814 Uttarakhand3161258642 Jharkhand2815204520 Goa181310617 Tripura158012061 Manipur13897330 Himachal Pradesh107074610 Puducherry101148014 Nagaland5782280 Chandigarh4874016 Arunachal Pradesh269781 Mizoram191130 Sikkim125650 Meghalaya80431
  Business   Economy  05 Feb 2019  Fiscal slippage for two consecutive years credit negative: Moody's

Fiscal slippage for two consecutive years credit negative: Moody's

PTI
Published : Feb 5, 2019, 12:14 pm IST
Updated : Feb 5, 2019, 12:15 pm IST

Government announced slippage from its original fiscal deficit targets to 3.4 per cent of GDP both for the fiscal years

Moody's said the Budget proposals are positive for the real estate sector but negative for state-owned oil and gas companies. (Photo: AFP)
 Moody's said the Budget proposals are positive for the real estate sector but negative for state-owned oil and gas companies. (Photo: AFP)

New Delhi: Moody's Investors Service on Tuesday said that fiscal slippage from the budgeted targets for the past two consecutive years and tax cuts and spending ahead of the general elections, is credit negative for India.

In the interim budget for 2019-20, the government proposed to increase spending to provide income support for small farmers and introduce a middle-class tax cut in the run up to the general election between April and May.

In light of these budget measures, the government announced slippage from its original fiscal deficit targets to 3.4 per cent of GDP both for the fiscal years ending in March 2019 and March 2020.

"Ongoing fiscal slippage from spending and tax cut proposals ahead of election is credit negative for the sovereign," Moody's said.

It said the ongoing fiscal slippage from the budgeted targets over the past two years, and our expectation that the government will face challenges meeting its target again in fiscal 2019, does not bode well for medium-term fiscal consolidation.

Moody's, however, said that lack of a formal capital support plan for public sector banks is credit negative.

The budget does not include any provisions for capital support for public sector banks (PSBs). Meanwhile, the budget also does not address last year's announced merger of three public sector non-life insurers, which creates ambiguity around their merger plan, the US-based rating agency said.

On cross-sector analysis of Budget, Moody's said the Budget proposals are positive for the real estate sector but negative for state-owned oil and gas companies.

"The budget includes both direct and indirect benefits for the real estate sector and will likely help boost property demand," Moody's said.

For state-owned oil and gas companies, a planned increase in expected proceeds from dividends and disinvestments, in addition to an under provision of fuel subsidies, is negative, it added. Further, modest increase in public spending for infrastructure is credit positive. The planned increase in public infrastructure spending is credit positive for companies in this sector. Capital outlays for key segments within infrastructure, like highways and railways, will increase modestly in fiscal 2019 from fiscal 2018.

Besides, middle-class tax relief and measures to boost farmers' incomes are credit positive for Indian asset-backed securities (ABS) and residential mortgage-backed securities (RMBS) because they will help borrowers remain current on their payments and reduce default risk.

Tags: economy, gdp growth, moody, fiscal deficit
Location: India, Delhi, New Delhi